With A 27% Price Drop For MiniLuxe Holding Corp. (CVE:MNLX) You'll Still Get What You Pay For

To the annoyance of some shareholders, MiniLuxe Holding Corp. (CVE:MNLX) shares are down a considerable 27% in the last month, which continues a horrid run for the company. Longer-term, the stock has been solid despite a difficult 30 days, gaining 22% in the last year.

Although its price has dipped substantially, there still wouldn't be many who think MiniLuxe Holding's price-to-sales (or "P/S") ratio of 1.5x is worth a mention when the median P/S in Canada's Consumer Services industry is similar at about 1.6x. 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.

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View our latest analysis for MiniLuxe Holding

How Has MiniLuxe Holding Performed Recently?

Revenue has risen at a steady rate over the last year for MiniLuxe Holding, which is generally not a bad outcome. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

Although there are no analyst estimates available for MiniLuxe Holding, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For MiniLuxe Holding?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 6.6% last year. This was backed up an excellent period prior to see revenue up by 44% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is predicted to deliver 13% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this information, we can see why MiniLuxe Holding is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Following MiniLuxe Holding's share price tumble, its P/S is just clinging on to the industry median P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we've seen, MiniLuxe Holding's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for MiniLuxe Holding that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.