Revenues Not Telling The Story For Trulieve Cannabis Corp. (CSE:TRUL) After Shares Rise 26%

Trulieve Cannabis Corp. (CSE:TRUL) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 124% in the last year.

Following the firm bounce in price, given close to half the companies operating in Canada's Pharmaceuticals industry have price-to-sales ratios (or "P/S") below 1.3x, you may consider Trulieve Cannabis as a stock to potentially avoid with its 2.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for Trulieve Cannabis

What Does Trulieve Cannabis' Recent Performance Look Like?

Trulieve Cannabis hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Trulieve Cannabis' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Trulieve Cannabis would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a frustrating 7.3% decrease to the company's top line. Even so, admirably revenue has lifted 117% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 6.3% each year as estimated by the analysts watching the company. With the industry predicted to deliver 9.8% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's alarming that Trulieve Cannabis' P/S sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Trulieve Cannabis' P/S?

Trulieve Cannabis' P/S is on the rise since its shares have risen strongly. 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.

Despite analysts forecasting some poorer-than-industry revenue growth figures for Trulieve Cannabis, this doesn't appear to be impacting the P/S in the slightest. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. At these price levels, investors should remain cautious, particularly if things don't improve.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Trulieve Cannabis you should know about.

If you're unsure about the strength of Trulieve Cannabis' 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.