CEMATRIX Corporation (CVE:CVX) Doing What It Can To Lift Shares

When you see that almost half of the companies in the Basic Materials industry in Canada have price-to-sales ratios (or "P/S") above 2.1x, CEMATRIX Corporation (CVE:CVX) looks to be giving off some buy signals with its 0.9x 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.

Check out our latest analysis for CEMATRIX

What Does CEMATRIX's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, CEMATRIX 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. 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.

Although there are no analyst estimates available for CEMATRIX, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is CEMATRIX's Revenue Growth Trending?

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.

Retrospectively, the last year delivered an exceptional 34% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 33% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 10% shows it's about the same on an annualised basis.

With this information, we find it odd that CEMATRIX is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Key Takeaway

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.

The fact that CEMATRIX currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for CEMATRIX (1 is potentially serious) you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.