Investors Give DMG Blockchain Solutions Inc. (CVE:DMGI) Shares A 25% Hiding

The DMG Blockchain Solutions Inc. (CVE:DMGI) share price has fared very poorly over the last month, falling by a substantial 25%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 35% in that time.

After such a large drop in price, DMG Blockchain Solutions may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2x, since almost half of all companies in the Software industry in Canada have P/S ratios greater than 3.4x and even P/S higher than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for DMG Blockchain Solutions

What Does DMG Blockchain Solutions' Recent Performance Look Like?

DMG Blockchain Solutions' revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

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.

Do Revenue Forecasts Match The Low P/S Ratio?

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 21%. The latest three year period has also seen an excellent 232% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 25% over the next year. With the industry only predicted to deliver 18%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that DMG Blockchain Solutions' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

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

DMG Blockchain Solutions' P/S has taken a dip along with its share price. 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.

To us, it seems DMG Blockchain Solutions currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. 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.

Before you take the next step, you should know about the 5 warning signs for DMG Blockchain Solutions (2 are significant!) that we have uncovered.

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.