Investors Give good natured Products Inc. (CVE:GDNP) Shares A 31% Hiding

Unfortunately for some shareholders, the good natured Products Inc. (CVE:GDNP) share price has dived 31% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 77% share price decline.

After such a large drop in price, good natured Products 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 Chemicals industry in Canada have P/S ratios greater than 1.7x and even P/S higher than 7x aren't out of the ordinary. 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 good natured Products

How Has good natured Products Performed Recently?

The revenue growth achieved at good natured Products over the last year would be more than acceptable for most companies. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on good natured Products 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 good natured Products will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For good natured Products?

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

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 12% shows it's a great look while it lasts.

In light of this, it's quite peculiar that good natured Products' P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

good natured Products' P/S has taken a dip along with its share price. 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.

Looking at the figures, it's surprising to see good natured Products currently trades on a much lower than expected P/S since its recent three-year revenue growth is beating forecasts for a struggling industry. One assumption would be that there are some underlying risks to revenue that are keeping the P/S from rising to match the its strong performance. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. While the chance of the share price dropping sharply is fairly remote, investors do seem to be anticipating future revenue instability.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for good natured Products (1 makes us a bit uncomfortable) you should be aware of.

If these risks are making you reconsider your opinion on good natured Products, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.