Many Still Looking Away From Real Matters Inc. (TSE:REAL)

With a price-to-sales (or "P/S") ratio of 1.9x Real Matters Inc. (TSE:REAL) may be sending bullish signals at the moment, given that almost half of all the Real Estate companies in Canada have P/S ratios greater than 2.5x and even P/S higher than 7x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Real Matters

How Real Matters Has Been Performing

While the industry has experienced revenue growth lately, Real Matters' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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 Any Revenue Growth Forecasted For Real Matters?

Real Matters' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 66% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 20% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 9.3%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Real Matters' P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

Real Matters' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

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.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.