Investors Give Green Impact Partners Inc. (CVE:GIP) Shares A 25% Hiding

To the annoyance of some shareholders, Green Impact Partners Inc. (CVE:GIP) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 67% loss during that time.

In spite of the heavy fall in price, Green Impact Partners' price-to-sales (or "P/S") ratio of 0.3x might still make it look like a buy right now compared to the Commercial Services industry in Canada, 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 Green Impact Partners

What Does Green Impact Partners' Recent Performance Look Like?

Green Impact Partners hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Green Impact Partners.

Is There Any Revenue Growth Forecasted For Green Impact Partners?

In order to justify its P/S ratio, Green Impact Partners would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 41% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth will be highly resilient over the next year growing by 14%. Meanwhile, the broader industry is forecast to contract by 0.05%, which would indicate the company is doing very well.

With this information, we find it very odd that Green Impact Partners is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the contrarian forecasts and have been accepting significantly lower selling prices.

The Final Word

Green Impact Partners' recently weak share price has pulled its P/S back below other Commercial Services companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Green Impact Partners currently trades on a much lower than expected P/S since its growth forecasts are potentially beating a struggling industry. We believe there could be some underlying risks that are keeping the P/S modest in the context of above-average revenue growth. One major risk is whether its revenue trajectory can keep outperforming under these tough industry conditions. So, the risk of a price drop looks to be subdued, but investors seem to think future revenue could see a lot of volatility.

Before you take the next step, you should know about the 4 warning signs for Green Impact Partners (1 is concerning!) that we have uncovered.

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.