Organigram Global Inc. (TSE:OGI) Soars 33% But It's A Story Of Risk Vs Reward

Organigram Global Inc. (TSE:OGI) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 27%.

Although its price has surged higher, it's still not a stretch to say that Organigram Global's price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Pharmaceuticals industry in Canada, where the median P/S ratio is around 1.1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for Organigram Global

What Does Organigram Global's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Organigram Global has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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 not quite in favour.

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How Is Organigram Global's Revenue Growth Trending?

Organigram Global's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 59%. The strong recent performance means it was also able to grow revenue by 78% 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 11% each year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 5.6% each year growth forecast for the broader industry.

With this information, we find it interesting that Organigram Global is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Organigram Global's P/S

Its shares have lifted substantially and now Organigram Global's P/S is back within range of the industry median. 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.

Despite enticing revenue growth figures that outpace the industry, Organigram Global's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Organigram Global with six simple checks on some of these key factors.

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.