Market Might Still Lack Some Conviction On Goodness Growth Holdings, Inc. (CSE:GDNS) Even After 30% Share Price Boost

Goodness Growth Holdings, Inc. (CSE:GDNS) shares have continued their recent momentum with a 30% gain in the last month alone. The last month tops off a massive increase of 251% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Goodness Growth Holdings' P/S ratio of 1x, since the median price-to-sales (or "P/S") ratio for the Pharmaceuticals industry in Canada is also close to 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Goodness Growth Holdings

What Does Goodness Growth Holdings' Recent Performance Look Like?

The revenue growth achieved at Goodness Growth Holdings over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

How Is Goodness Growth Holdings' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Pleasingly, revenue has also lifted 85% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 5.7% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Goodness Growth Holdings' P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Goodness Growth Holdings' P/S

Goodness Growth Holdings appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Goodness Growth Holdings currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. 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.

Plus, you should also learn about these 5 warning signs we've spotted with Goodness Growth Holdings (including 3 which are significant).

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.