Investors Holding Back On Scholastic Corporation (NASDAQ:SCHL)
Scholastic Corporation's (NASDAQ:SCHL) price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Media industry in the United States, where around half of the companies have P/S ratios above 1x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
See our latest analysis for Scholastic
How Scholastic Has Been Performing
Recent times haven't been great for Scholastic as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Scholastic will help you uncover what's on the horizon.Is There Any Revenue Growth Forecasted For Scholastic?
In order to justify its P/S ratio, Scholastic would need to produce sluggish growth that's trailing the industry.
Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. This isn't what shareholders were looking for as it means they've been left with a 2.0% decline in revenue over the last three years in total. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Turning to the outlook, the next year should generate growth of 3.6% as estimated by the dual analysts watching the company. With the industry predicted to deliver 4.5% growth , the company is positioned for a comparable revenue result.
With this information, we find it odd that Scholastic is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
What We Can Learn From Scholastic's P/S?
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've seen that Scholastic currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.
Plus, you should also learn about this 1 warning sign we've spotted with Scholastic.
If these risks are making you reconsider your opinion on Scholastic, explore our interactive list of high quality stocks to get an idea of what else is out there.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.