The Price Is Right For Organigram Holdings Inc. (TSE:OGI)
It's not a stretch to say that Organigram Holdings Inc.'s (TSE:OGI) price-to-sales (or "P/S") ratio of 1.1x right now seems quite "middle-of-the-road" for companies in the Pharmaceuticals industry in Canada, where the median P/S ratio is around 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
Check out our latest analysis for Organigram Holdings
How Organigram Holdings Has Been Performing
With revenue growth that's superior to most other companies of late, Organigram Holdings has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Organigram Holdings will help you uncover what's on the horizon.
Is There Some Revenue Growth Forecasted For Organigram Holdings?
Organigram Holdings' 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.
Taking a look back first, we see that the company grew revenue by an impressive 55% last year. The strong recent performance means it was also able to grow revenue by 86% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.
Turning to the outlook, the next three years should generate growth of 21% per year as estimated by the ten analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 20% per year, which is not materially different.
In light of this, it's understandable that Organigram Holdings' P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.
The Final Word
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.
Our look at Organigram Holdings' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.
Plus, you should also learn about these 3 warning signs we've spotted with Organigram Holdings.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
