Even With A 26% Surge, Cautious Investors Are Not Rewarding CEMATRIX Corporation's (TSE:CEMX) Performance Completely

CEMATRIX Corporation (TSE:CEMX) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 48% in the last twelve months.

Although its price has surged higher, when close to half the companies operating in Canada's Basic Materials industry have price-to-sales ratios (or "P/S") above 2.3x, you may still consider CEMATRIX as an enticing stock to check out with its 0.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for CEMATRIX

How CEMATRIX Has Been Performing

Recent times haven't been great for CEMATRIX as its revenue has been falling quicker than most other companies. It seems that many are expecting the dismal revenue performance to persist, which has repressed the P/S. You'd much rather the company improve its revenue performance if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think CEMATRIX's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 34%. Even so, admirably revenue has lifted 56% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 56% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 7.7%, which is noticeably less attractive.

In light of this, it's peculiar that CEMATRIX's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

CEMATRIX's stock price has surged recently, but its but its P/S still remains modest. 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.

A look at CEMATRIX's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you settle on your opinion, we've discovered 3 warning signs for CEMATRIX that 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.