Investors Still Aren't Entirely Convinced By BluMetric Environmental Inc.'s (CVE:BLM) Revenues Despite 28% Price Jump

BluMetric Environmental Inc. (CVE:BLM) shares have continued their recent momentum with a 28% gain in the last month alone. The annual gain comes to 244% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about BluMetric Environmental's P/S ratio of 1.1x, since the median price-to-sales (or "P/S") ratio for the Commercial Services industry in Canada is also close to 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for BluMetric Environmental

How BluMetric Environmental Has Been Performing

Recent times have been advantageous for BluMetric Environmental as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on BluMetric Environmental will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For BluMetric Environmental?

There's an inherent assumption that a company should be matching the industry for P/S ratios like BluMetric Environmental's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. As a result, it also grew revenue by 15% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue growth will be highly resilient over the next year growing by 33%. With the rest of the industry predicted to shrink by 16%, that would be a fantastic result.

With this in mind, we find it intriguing that BluMetric Environmental's P/S trades in-line with its industry peers. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

What We Can Learn From BluMetric Environmental's P/S?

BluMetric Environmental appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We note that even though BluMetric Environmental trades at a similar P/S as the rest of the industry, it far eclipses them in terms of forecasted revenue growth. There could be some unobserved threats to revenue preventing the P/S ratio from matching the positive outlook. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

We don't want to rain on the parade too much, but we did also find 4 warning signs for BluMetric Environmental that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.