Yahoo Finance Investor Optimism Abounds Tilray Brands, Inc. (NASDAQ:TLRY) But Growth Is Lacking
There wouldn't be many who think Tilray Brands, Inc.'s (NASDAQ:TLRY) price-to-sales (or "P/S") ratio of 2.5x is worth a mention when the median P/S for the Pharmaceuticals industry in the United States is similar at about 3.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for Tilray Brands
What Does Tilray Brands' P/S Mean For Shareholders?
Tilray Brands could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
Keen to find out how analysts think Tilray Brands' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Some Revenue Growth Forecasted For Tilray Brands?
In order to justify its P/S ratio, Tilray Brands would need to produce growth that's similar to the industry.
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%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 54% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 13% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 39% each year, which is noticeably more attractive.
In light of this, it's curious that Tilray Brands' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.
The Bottom Line On Tilray Brands' P/S
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.
Given that Tilray Brands' revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
Having said that, be aware Tilray Brands is showing 2 warning signs in our investment analysis, you should know about.
If these risks are making you reconsider your opinion on Tilray Brands, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.
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