DMG Blockchain Solutions Inc. (CVE:DMGI) Stock Catapults 34% Though Its Price And Business Still Lag The Industry

Despite an already strong run, DMG Blockchain Solutions Inc. (CVE:DMGI) shares have been powering on, with a gain of 34% in the last thirty days. Looking further back, the 13% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, DMG Blockchain Solutions may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.4x, since almost half of all companies in the Software industry in Canada have P/S ratios greater than 3.6x and even P/S higher than 13x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for DMG Blockchain Solutions

What Does DMG Blockchain Solutions' P/S Mean For Shareholders?

DMG Blockchain Solutions could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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.

Keen to find out how analysts think DMG Blockchain Solutions' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For DMG Blockchain Solutions?

There's an inherent assumption that a company should underperform the industry for P/S ratios like DMG Blockchain Solutions' to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. However, a few strong years before that means that it was still able to grow revenue by an impressive 219% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 4.3% over the next year. That's shaping up to be materially lower than the 18% growth forecast for the broader industry.

With this in consideration, its clear as to why DMG Blockchain Solutions' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does DMG Blockchain Solutions' P/S Mean For Investors?

DMG Blockchain Solutions' stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that DMG Blockchain Solutions maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 4 warning signs for DMG Blockchain Solutions (2 are potentially serious!) that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.