Lifeist Wellness Inc. (CVE:LFST) Stock Rockets 50% As Investors Are Less Pessimistic Than Expected

Those holding Lifeist Wellness Inc. (CVE:LFST) shares would be relieved that the share price has rebounded 50% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 73% share price decline over the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Lifeist Wellness' P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Retail Distributors industry in Canada is also close to 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Lifeist Wellness

How Has Lifeist Wellness Performed Recently?

Lifeist Wellness has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Lifeist Wellness' earnings, revenue and cash flow.

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

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

Retrospectively, the last year delivered a decent 7.2% gain to the company's revenues. 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 the recent medium-term revenue trends against the industry's one-year growth forecast of 5.4% shows it's noticeably less attractive.

With this in mind, we find it intriguing that Lifeist Wellness' P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On Lifeist Wellness' P/S

Lifeist Wellness appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Lifeist Wellness' average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Lifeist Wellness (3 are potentially serious) you should be aware of.

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.