TAAT Global Alternatives Inc.'s (CSE:TAAT) 38% Dip In Price Shows Sentiment Is Matching Revenues

Unfortunately for some shareholders, the TAAT Global Alternatives Inc. (CSE:TAAT) share price has dived 38% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 81% loss during that time.

Since its price has dipped substantially, TAAT Global Alternatives may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Personal Products industry in Canada have P/S ratios greater than 1.4x 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.

View our latest analysis for TAAT Global Alternatives

How TAAT Global Alternatives Has Been Performing

With revenue growth that's exceedingly strong of late, TAAT Global Alternatives has been doing very well. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on TAAT Global Alternatives will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on TAAT Global Alternatives will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

This is in contrast to the rest of the industry, which is expected to grow by 8.3% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why TAAT Global Alternatives is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On TAAT Global Alternatives' P/S

The southerly movements of TAAT Global Alternatives' shares means its P/S is now sitting at a pretty low level. 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.

Our examination of TAAT Global Alternatives confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 4 warning signs we've spotted with TAAT Global Alternatives (including 2 which don't sit too well with us).

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.