Lacklustre Performance Is Driving Lifeist Wellness Inc.'s (CVE:LFST) 50% Price Drop

Unfortunately for some shareholders, the Lifeist Wellness Inc. (CVE:LFST) share price has dived 50% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 90% share price decline.

Following the heavy fall in price, when close to half the companies operating in Canada's Retail Distributors industry have price-to-sales ratios (or "P/S") above 0.9x, you may consider Lifeist Wellness as an enticing stock to check out with its 0.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Lifeist Wellness

How Lifeist Wellness Has Been Performing

The recent revenue growth at Lifeist Wellness would have to be considered satisfactory if not spectacular. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Lifeist Wellness will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Lifeist Wellness will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Lifeist Wellness' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 7.2%. The solid recent performance means it was also able to grow revenue by 6.0% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 5.7% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Lifeist Wellness' P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On Lifeist Wellness' P/S

The southerly movements of Lifeist Wellness' shares means its P/S is now sitting at a pretty low level. 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.

Our examination of Lifeist Wellness confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 4 warning signs for Lifeist Wellness (3 can't be ignored!) that you need to take into consideration.

If you're unsure about the strength of Lifeist Wellness' 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.