Dolphin Entertainment, Inc. (NASDAQ:DLPN) is being held back by insufficient growth, even after shares soared 98%

Dolphin Entertainment, Inc. (NASDAQ:DLPN) shareholders would be happy to see the stock price have a great month, posting a 98% gain and recovering from previous weakness. Unfortunately, last month’s gains barely offset last year’s losses, as the stock still lost 17% in that period.

Although the price has risen, Dolphin Entertainment could still be sending buy signals with its price-to-sales ratio (or “P/S”) of 0.7 at the moment, considering almost half of all entertainment companies in the United States have P /S ratios of more than 1.6x and even P/S ratios of more than 5x are not uncommon. However, the P/S could be low for a reason and further research is needed to determine if it is justified.

Check out our latest analysis for Dolphin Entertainment

How has Dolphin Entertainment developed recently?

With revenue growth lagging behind most other companies recently, Dolphin Entertainment has been relatively sluggish. The P/E ratio is likely low because investors believe this weak sales performance won’t get any better. If this is the case, existing shareholders will likely have difficulty getting excited about the future direction of the share price.

If you want to see what analysts are predicting for the future, you should check out our free Report on Dolphin Entertainment.

What do revenue growth metrics tell us about the low P/E ratio?

To justify its P/E ratio, Dolphin Entertainment would need to deliver slow growth that lags the industry.

Looking back, last year brought an extraordinary 17% increase in the company’s revenue. In the last three-year period, total sales increased by an outstanding 74% thanks to short-term performance. Accordingly, shareholders would have welcomed these medium-term sales growth rates.

As for the outlook, next year is expected to generate 8.3% growth, according to estimates from the only analyst covering the company. However, growth of 11% is forecast for the rest of the industry, which is much more attractive.

With this in mind, it’s understandable that Dolphin Entertainment’s P/S is lower than most other companies. Apparently many shareholders were uncomfortable holding on to the stock while the company potentially faces a less successful future.

What can we learn from Dolphin Entertainment’s P/S?

Although Dolphin Entertainment’s stock price has risen recently, its P/E ratio still lags behind most other companies. We would say that the price-to-sales ratio is not primarily a valuation tool, but rather is used to measure current investor sentiment and future expectations.

We noted that Dolphin Entertainment maintains its low P/E ratio due to weakness in its forecast growth, which is expected to be lower than the broader industry. At this point, investors believe that the potential for revenue improvement is not great enough to justify a higher P/E ratio. Under these circumstances, it is hard to imagine that the share price will rise much in the near future.

In addition, you should also find out about it 3 warning signs we’ve spotted with Dolphin Entertainment (including 1, which should not be ignored).

If you like strong companies that make profits, then you should check this out free List of interesting companies that trade on a low P/E ratio (but have proven they can grow profits).

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.