Market Might Still Lack Some Conviction On DMG Blockchain Solutions Inc. (CVE:DMGI) Even After 31% Share Price Boost

DMG Blockchain Solutions Inc. (CVE:DMGI) shareholders have had their patience rewarded with a 31% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 41% over that time.

Even after such a large jump in price, DMG Blockchain Solutions may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.7x, 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 10x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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See our latest analysis for DMG Blockchain Solutions

How DMG Blockchain Solutions Has Been Performing

There hasn't been much to differentiate DMG Blockchain Solutions' and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. Those who are bullish on DMG Blockchain Solutions will be hoping that this isn't the case.

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?

In order to justify its P/S ratio, DMG Blockchain Solutions would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. As a result, it also grew revenue by 20% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next three years should generate growth of 72% each year as estimated by the three analysts watching the company. With the industry only predicted to deliver 28% per annum, the company is positioned for a stronger revenue result.

With this information, we find it odd that DMG Blockchain Solutions is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

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

The latest share price surge wasn't enough to lift DMG Blockchain Solutions' P/S close to the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at DMG Blockchain Solutions' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about these 4 warning signs we've spotted with DMG Blockchain Solutions (including 1 which is a bit concerning).

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.