The Market Doesn't Like What It Sees From Golden Matrix Group, Inc.'s (NASDAQ:GMGI) Revenues Yet As Shares Tumble 26%

Unfortunately for some shareholders, the Golden Matrix Group, Inc. (NASDAQ:GMGI) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 66% share price decline.

Following the heavy fall in price, Golden Matrix Group's price-to-sales (or "P/S") ratio of 0.6x might make it look like a buy right now compared to the Entertainment industry in the United States, where around half of the companies have P/S ratios above 1.3x and even P/S above 6x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Golden Matrix Group

What Does Golden Matrix Group's P/S Mean For Shareholders?

Recent times have been advantageous for Golden Matrix Group as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Golden Matrix Group?

The only time you'd be truly comfortable seeing a P/S as low as Golden Matrix Group's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 37% gain to the company's top line. Pleasingly, revenue has also lifted 139% in aggregate from three years ago, thanks to the last 12 months of growth. 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 three analysts covering the company suggest revenue should grow by 15% over the next year. Meanwhile, the rest of the industry is forecast to expand by 19%, which is noticeably more attractive.

With this information, we can see why Golden Matrix Group 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 Golden Matrix Group's P/S Mean For Investors?

Golden Matrix Group's P/S has taken a dip along with its share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Golden Matrix Group 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Golden Matrix Group 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.