Plurilock Security Inc.'s (CVE:PLUR) Price Is Right But Growth Is Lacking

With a price-to-sales (or "P/S") ratio of 0.2x Plurilock Security Inc. (CVE:PLUR) may be sending very bullish signals at the moment, given that almost half of all the Software companies in Canada have P/S ratios greater than 3.3x and even P/S higher than 11x 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 so limited.

View our latest analysis for Plurilock Security

How Plurilock Security Has Been Performing

Plurilock Security certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 out of favour.

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

How Is Plurilock Security's Revenue Growth Trending?

In order to justify its P/S ratio, Plurilock Security would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 74% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 7.4% during the coming year according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 18%, which is noticeably more attractive.

With this information, we can see why Plurilock Security 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 Does Plurilock Security's P/S Mean For Investors?

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.

As we suspected, our examination of Plurilock Security's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 3 warning signs for Plurilock Security (2 make us uncomfortable!) that you should be aware of.

If you're unsure about the strength of Plurilock Security's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.