What You Can Learn From Green Impact Partners Inc.'s (CVE:GIP) P/S

It's not a stretch to say that Green Impact Partners Inc.'s (CVE:GIP) price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" for companies in the Commercial Services industry in Canada, where the median P/S ratio is around 0.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Green Impact Partners

How Green Impact Partners Has Been Performing

While the industry has experienced revenue growth lately, Green Impact Partners' revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability 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.

What Are Revenue Growth Metrics Telling Us About The P/S?

Green Impact Partners' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 25% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 26% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the sole analyst covering the company are not great, suggesting revenue should decline by 2.5% over the next year. Meanwhile, the industry is forecast to moderate by 1.7%, which suggests the company won't escape the wider industry forces.

In light of this, it's understandable that Green Impact Partners' P/S sits in line with the majority of other companies. Nonetheless, with revenue going in reverse, it's not guaranteed that the P/S has found a floor yet. Maintaining these prices will be difficult to achieve as the weak outlook is likely to weigh down the shares eventually.

What We Can Learn From Green Impact Partners' P/S?

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.

Our findings align with our suspicions - a closer look at Green Impact Partners' analyst forecasts shows that the company's similarly unstable outlook compared to the industry is keeping its price-to-sales ratio in line with the industry's average. Right now, shareholders are comfortable with the P/S as they have faith that future revenue will not uncover any unpleasant surprises. Although, we are somewhat concerned whether the company can maintain this level of performance under these tough industry conditions. It seems that unless there's a drastic change, it's hard to imagine that the share price will deviate much from current levels.

It is also worth noting that we have found 3 warning signs for Green Impact Partners (1 is concerning!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com