Market Cool On Planet 13 Holdings Inc.'s (CSE:PLTH) Revenues Pushing Shares 26% Lower

Unfortunately for some shareholders, the Planet 13 Holdings Inc. (CSE:PLTH) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 61% loss during that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Planet 13 Holdings' P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Pharmaceuticals industry in Canada is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Planet 13 Holdings

What Does Planet 13 Holdings' Recent Performance Look Like?

There hasn't been much to differentiate Planet 13 Holdings' and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. Those who are bullish on Planet 13 Holdings will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

Want the full picture on analyst estimates for the company? Then our free report on Planet 13 Holdings will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Planet 13 Holdings' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. Still, revenue has fallen 2.6% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 14% during the coming year according to the only analyst following the company. With the industry only predicted to deliver 8.3%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Planet 13 Holdings is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Planet 13 Holdings' P/S?

Planet 13 Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Looking at Planet 13 Holdings' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Planet 13 Holdings (2 don't sit too well with us!) that you should be aware of before investing here.

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.