DMG Blockchain Solutions Inc.'s (CVE:DMGI) Low P/S No Reason For Excitement

With a price-to-sales (or "P/S") ratio of 2.4x DMG Blockchain Solutions Inc. (CVE:DMGI) may be sending bullish signals at the moment, given that almost half of all the Software companies in Canada have P/S ratios greater than 3.7x and even P/S higher than 9x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for DMG Blockchain Solutions

How DMG Blockchain Solutions Has Been Performing

With revenue growth that's inferior to most other companies of late, DMG Blockchain Solutions has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on DMG Blockchain Solutions will help you uncover what's on the horizon.

How Is DMG Blockchain Solutions' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 17%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 12% during the coming year according to the lone analyst following the company. That's shaping up to be materially lower than the 20% growth forecast for the broader industry.

With this information, we can see why DMG Blockchain Solutions is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From DMG Blockchain Solutions' P/S?

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.

As we suspected, our examination of DMG Blockchain Solutions' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for DMG Blockchain Solutions that you should be aware of.

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.