Christina Lake Cannabis Corp. (CSE:CLC) Stock Rockets 33% But Many Are Still Ignoring The Company

Christina Lake Cannabis Corp. (CSE:CLC) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

Even after such a large jump in price, it's still not a stretch to say that Christina Lake Cannabis' price-to-sales (or "P/S") ratio of 0.7x right now seems quite "middle-of-the-road" compared to the Pharmaceuticals industry in Canada, where the median P/S ratio is around 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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View our latest analysis for Christina Lake Cannabis

What Does Christina Lake Cannabis' P/S Mean For Shareholders?

The revenue growth achieved at Christina Lake Cannabis over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Christina Lake Cannabis will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Christina Lake Cannabis, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Christina Lake Cannabis' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 21% last year. The strong recent performance means it was also able to grow revenue by 69% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 13% shows it's noticeably more attractive.

In light of this, it's curious that Christina Lake Cannabis' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Christina Lake Cannabis' P/S?

Christina Lake Cannabis' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Christina Lake Cannabis currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Having said that, be aware Christina Lake Cannabis is showing 2 warning signs in our investment analysis, you should know about.

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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.