Investors Still Aren't Entirely Convinced By Ascend Wellness Holdings, Inc.'s (CSE:AAWH.U) Revenues Despite 49% Price Jump

Ascend Wellness Holdings, Inc. (CSE:AAWH.U) shares have continued their recent momentum with a 49% gain in the last month alone. Looking further back, the 17% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, Ascend Wellness Holdings may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Personal Products industry in Canada have P/S ratios greater than 1.5x and even P/S higher than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Ascend Wellness Holdings

How Ascend Wellness Holdings Has Been Performing

With revenue growth that's inferior to most other companies of late, Ascend Wellness Holdings has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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 Ascend Wellness Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Ascend Wellness Holdings' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 28%. The strong recent performance means it was also able to grow revenue by 241% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 6.8% each year during the coming three years according to the nine analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 5.6% each year, which is not materially different.

With this in consideration, we find it intriguing that Ascend Wellness Holdings' 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 Final Word

Despite Ascend Wellness Holdings' share price climbing recently, its P/S still lags most other companies. 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.

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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Ascend Wellness Holdings (1 is significant) you should be aware of.

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.