Potential Upside For Greenlane Renewables Inc. (TSE:GRN) Not Without Risk

You may think that with a price-to-sales (or "P/S") ratio of 0.5x Greenlane Renewables Inc. (TSE:GRN) is a stock worth checking out, seeing as almost half of all the Oil and Gas companies in Canada have P/S ratios greater than 1.7x and even P/S higher than 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Greenlane Renewables

How Greenlane Renewables Has Been Performing

Recent times haven't been great for Greenlane Renewables as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Greenlane Renewables' future stacks up against the industry? In that case, our free report is a great place to start.

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

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

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 5.4% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.0% each year, which is not materially different.

With this in consideration, we find it intriguing that Greenlane Renewables' P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Greenlane Renewables' P/S

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 seen that Greenlane Renewables currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

You always need to take note of risks, for example - Greenlane Renewables has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Greenlane Renewables, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.