Organigram Holdings Inc.'s (TSE:OGI) P/S Is On The Mark

There wouldn't be many who think Organigram Holdings Inc.'s (TSE:OGI) price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S for the Pharmaceuticals industry in Canada is similar at about 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Organigram Holdings

How Has Organigram Holdings Performed Recently?

Recent times have been advantageous for Organigram Holdings as its revenues have been rising faster than most other companies. 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.

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

How Is Organigram Holdings' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 55%. The strong recent performance means it was also able to grow revenue by 86% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 21% each year over the next three years. With the industry predicted to deliver 20% growth per annum, the company is positioned for a comparable revenue result.

In light of this, it's understandable that Organigram Holdings' 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.

The Bottom Line On Organigram Holdings' P/S

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.

We've seen that Organigram Holdings maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 3 warning signs for Organigram Holdings you should be aware of.

If these risks are making you reconsider your opinion on Organigram Holdings, 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.