The Price Is Right For Curaleaf Holdings, Inc. (TSE:CURA) Even After Diving 30%

To the annoyance of some shareholders, Curaleaf Holdings, Inc. (TSE:CURA) shares are down a considerable 30% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 74% share price decline.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Curaleaf Holdings' P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Pharmaceuticals industry in Canada is also close to 0.7x. 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 Curaleaf Holdings

What Does Curaleaf Holdings' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Curaleaf Holdings' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Curaleaf Holdings.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Curaleaf Holdings' is when the company's growth is tracking the industry closely.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Fortunately, a few good years before that means that it was still able to grow revenue by 12% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 6.2% per annum during the coming three years according to the ten analysts following the company. That's shaping up to be similar to the 7.8% per annum growth forecast for the broader industry.

With this information, we can see why Curaleaf Holdings is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From Curaleaf Holdings' P/S?

With its share price dropping off a cliff, the P/S for Curaleaf Holdings looks to be in line with the rest of the Pharmaceuticals 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.

Our look at Curaleaf Holdings' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

It is also worth noting that we have found 1 warning sign for Curaleaf Holdings that you need to take into consideration.

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).

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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.