Not Many Are Piling Into 1CM Inc. (CSE:EPIC) Just Yet

There wouldn't be many who think 1CM Inc.'s (CSE:EPIC) price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S for the Pharmaceuticals industry in Canada is similar at about 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for 1CM

How 1CM Has Been Performing

1CM certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on 1CM will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for 1CM, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is 1CM's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like 1CM's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 46% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 22%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that 1CM's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

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.

We didn't quite envision 1CM's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for 1CM (1 doesn't sit too well with us!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.