Investors Holding Back On Real Matters Inc. (TSE:REAL)

It's not a stretch to say that Real Matters Inc.'s (TSE:REAL) price-to-sales (or "P/S") ratio of 1.8x right now seems quite "middle-of-the-road" for companies in the Real Estate industry in Canada, where the median P/S ratio is around 2.2x. 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 Real Matters

What Does Real Matters' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Real Matters has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. 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 Real Matters will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Real Matters?

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

If we review the last year of revenue growth, the company posted a worthy increase of 11%. However, this wasn't enough as the latest three year period has seen an unpleasant 64% overall drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 17% as estimated by the five analysts watching the company. With the industry only predicted to deliver 7.1%, the company is positioned for a stronger revenue result.

In light of this, it's curious that Real Matters' P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Real Matters' P/S

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.

Despite enticing revenue growth figures that outpace the industry, Real Matters' P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Real Matters with six simple checks on some of these key factors.

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.