Little Excitement Around Tilray Brands, Inc.'s (NASDAQ:TLRY) Revenues

With a price-to-sales (or "P/S") ratio of 2.5x Tilray Brands, Inc. (NASDAQ:TLRY) may be sending bullish signals at the moment, given that almost half of all the Pharmaceuticals companies in the United States have P/S ratios greater than 3.1x and even P/S higher than 15x 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 Tilray Brands

How Has Tilray Brands Performed Recently?

Tilray Brands hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Tilray Brands.

Is There Any Revenue Growth Forecasted For Tilray Brands?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Tilray Brands' to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 3.4%. Even so, admirably revenue has lifted 54% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 14% per year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 31% per annum, which is noticeably more attractive.

In light of this, it's understandable that Tilray Brands' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Tilray Brands' 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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Tilray Brands you should know about.

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

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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.