Market Cool On 4Front Ventures Corp.'s (CSE:FFNT) Revenues Pushing Shares 34% Lower

Unfortunately for some shareholders, the 4Front Ventures Corp. (CSE:FFNT) share price has dived 34% 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 65% share price decline.

After such a large drop in price, it would be understandable if you think 4Front Ventures is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.7x, considering almost half the companies in Canada's Pharmaceuticals industry have P/S ratios above 1.3x. 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 4Front Ventures

What Does 4Front Ventures' P/S Mean For Shareholders?

4Front Ventures could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could 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 4Front Ventures will help you uncover what's on the horizon.

How Is 4Front Ventures' Revenue Growth Trending?

4Front Ventures' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a decent 6.3% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 132% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 18% over the next year. With the industry only predicted to deliver 4.4%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that 4Front Ventures' 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.

What Does 4Front Ventures' P/S Mean For Investors?

The southerly movements of 4Front Ventures' shares means its P/S is now sitting at a pretty low level. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

4Front Ventures' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. 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.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for 4Front Ventures (2 are a bit concerning) you should be aware of.

If you're unsure about the strength of 4Front Ventures' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.