Yahoo Finance Investors Appear Satisfied With Bilibili Inc.'s (NASDAQ:BILI) Prospects
When close to half the companies in the Entertainment industry in the United States have price-to-sales ratios (or "P/S") below 1.5x, you may consider Bilibili Inc. (NASDAQ:BILI) as a stock to potentially avoid with its 2.8x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Bilibili
How Has Bilibili Performed Recently?
With revenue growth that's inferior to most other companies of late, Bilibili has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying to much for the stock.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bilibili.
How Is Bilibili's Revenue Growth Trending?
Bilibili's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.
Retrospectively, the last year delivered a decent 13% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 223% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.
Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 15% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 10% per year, which is noticeably less attractive.
In light of this, it's understandable that Bilibili's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
What Does Bilibili's P/S Mean For Investors?
Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
As we suspected, our examination of Bilibili's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
Plus, you should also learn about these 2 warning signs we've spotted with Bilibili.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
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