Aurora Cannabis Inc. (TSE:ACB) Stocks Shoot Up 27% But Its P/S Still Looks Reasonable

Aurora Cannabis Inc. (TSE:ACB) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 4.6% over the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Aurora Cannabis' P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Pharmaceuticals industry in Canada is also close to 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for Aurora Cannabis

What Does Aurora Cannabis' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Aurora Cannabis has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

How Is Aurora Cannabis' Revenue Growth Trending?

Aurora Cannabis' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 29%. Pleasingly, revenue has also lifted 62% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 5.3% per annum as estimated by the four analysts watching the company. That's shaping up to be similar to the 4.9% per annum growth forecast for the broader industry.

In light of this, it's understandable that Aurora Cannabis' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Aurora Cannabis' P/S Mean For Investors?

Aurora Cannabis appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

We've seen that Aurora Cannabis maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Aurora Cannabis with six simple checks on some of these key factors.

If you're unsure about the strength of Aurora 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.