A Piece Of The Puzzle Missing From Criterium Energy Ltd.'s (CVE:CEQ) 31% Share Price Climb

Criterium Energy Ltd. (CVE:CEQ) shares have had a really impressive month, gaining 31% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 37% over that time.

Although its price has surged higher, Criterium Energy may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.7x, considering almost half of all companies in the Oil and Gas industry in Canada have P/S ratios greater than 2x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Criterium Energy

How Has Criterium Energy Performed Recently?

With revenue growth that's exceedingly strong of late, Criterium Energy has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Criterium Energy will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Is There Any Revenue Growth Forecasted For Criterium Energy?

Criterium Energy's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. The amazing performance means it was also able to deliver huge revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 4.2% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that Criterium Energy is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Criterium Energy's P/S

The latest share price surge wasn't enough to lift Criterium Energy's P/S close to the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We're very surprised to see Criterium Energy currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for Criterium Energy (4 can't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Criterium Energy, 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.