Tilray Brands, Inc.'s (NASDAQ:TLRY) Share Price Boosted 29% But Its Business Prospects Need A Lift Too

Tilray Brands, Inc. (NASDAQ:TLRY) shares have continued their recent momentum with a 29% gain in the last month alone. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 5.3% in the last twelve months.

Although its price has surged higher, Tilray Brands may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.2x, since almost half of all companies in the Pharmaceuticals industry in the United States have P/S ratios greater than 4.4x and even P/S higher than 18x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Tilray Brands

How Has Tilray Brands Performed Recently?

Tilray Brands could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

Retrospectively, the last year delivered a decent 4.1% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 31% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 4.6% per year during the coming three years according to the nine analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 28% each year, which is noticeably more attractive.

With this information, we can see why Tilray Brands is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Tilray Brands' recent share price jump still sees fails to bring its P/S alongside the industry median. 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 Tilray Brands' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Tilray Brands (of which 1 is a bit concerning!) you should know about.

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.