Further Upside For Ascend Wellness Holdings, Inc. (CSE:AAWH.U) Shares Could Introduce Price Risks After 41% Bounce

The Ascend Wellness Holdings, Inc. (CSE:AAWH.U) share price has done very well over the last month, posting an excellent gain of 41%. The annual gain comes to 130% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, when close to half the companies operating in Canada's Personal Products industry have price-to-sales ratios (or "P/S") above 2.1x, you may still consider Ascend Wellness Holdings as an enticing stock to check out with its 0.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for Ascend Wellness Holdings

What Does Ascend Wellness Holdings' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Ascend Wellness Holdings' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ascend Wellness Holdings.

How Is Ascend Wellness Holdings' Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.8%. Still, the latest three year period has seen an excellent 35% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 5.7% each year over the next three years. With the industry predicted to deliver 4.9% growth per year, the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Ascend Wellness Holdings' P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Ascend Wellness Holdings' P/S?

Ascend Wellness Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Ascend Wellness Holdings' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 2 warning signs for Ascend Wellness Holdings (1 is significant!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.