More Unpleasant Surprises Could Be In Store For Trulieve Cannabis Corp.'s (CSE:TRUL) Shares After Tumbling 56%

Trulieve Cannabis Corp. (CSE:TRUL) shares have had a horrible month, losing 56% after a relatively good period beforehand. Longer-term shareholders would now have taken a real hit with the stock declining 4.6% in the last year.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Trulieve Cannabis' P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Pharmaceuticals industry in Canada is also close to 0.8x. 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.

Check out our latest analysis for Trulieve Cannabis

What Does Trulieve Cannabis' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Trulieve Cannabis has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Trulieve Cannabis?

In order to justify its P/S ratio, Trulieve Cannabis would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 2.8% last year. This was backed up an excellent period prior to see revenue up by 46% 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 eleven analysts covering the company suggest revenue should grow by 6.3% per year over the next three years. That's shaping up to be materially lower than the 10% each year growth forecast for the broader industry.

In light of this, it's curious that Trulieve Cannabis' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Trulieve Cannabis' P/S

Trulieve Cannabis' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

When you consider that Trulieve Cannabis' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

Plus, you should also learn about these 2 warning signs we've spotted with Trulieve Cannabis.

If these risks are making you reconsider your opinion on Trulieve Cannabis, 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.