Market Might Still Lack Some Conviction On MiniLuxe Holding Corp. (CVE:MNLX) Even After 41% Share Price Boost

MiniLuxe Holding Corp. (CVE:MNLX) shareholders have had their patience rewarded with a 41% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 17% is also fairly reasonable.

Even after such a large jump in price, there still wouldn't be many who think MiniLuxe Holding's price-to-sales (or "P/S") ratio of 2.8x is worth a mention when the median P/S in Canada's Consumer Services industry is similar at about 2.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for MiniLuxe Holding

How MiniLuxe Holding Has Been Performing

The revenue growth achieved at MiniLuxe Holding over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on MiniLuxe Holding will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like MiniLuxe Holding's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 8.0% gain to the company's revenues. The latest three year period has also seen an excellent 79% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

When compared to the industry's one-year growth forecast of 13%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that MiniLuxe Holding's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

MiniLuxe Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that MiniLuxe Holding currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 3 warning signs for MiniLuxe Holding (1 is a bit 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.