CEMATRIX Corporation's (TSE:CEMX) Shares Not Telling The Full Story

When close to half the companies in the Basic Materials industry in Canada have price-to-sales ratios (or "P/S") above 3.3x, you may consider CEMATRIX Corporation (TSE:CEMX) as a highly attractive investment with its 0.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for CEMATRIX

What Does CEMATRIX's P/S Mean For Shareholders?

Recent times have been advantageous for CEMATRIX as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you 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.

Want the full picture on analyst estimates for the company? Then our free report on CEMATRIX will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For CEMATRIX?

The only time you'd be truly comfortable seeing a P/S as depressed as CEMATRIX's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 6.0%. This was backed up an excellent period prior to see revenue up by 122% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 28% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 8.6%, which is noticeably less attractive.

With this in consideration, we find it intriguing that CEMATRIX's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On CEMATRIX's P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

CEMATRIX's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware CEMATRIX is showing 2 warning signs in our investment analysis, you should know about.

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.