Yahoo Finance Some Goodfood Market Corp. (TSE:FOOD) Shareholders Look For Exit As Shares Take 33% Pounding
The Goodfood Market Corp. (TSE:FOOD) share price has fared very poorly over the last month, falling by a substantial 33%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 50% loss during that time.
Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Goodfood Market's P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Consumer Retailing industry in Canada is also close to 0.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for Goodfood Market
What Does Goodfood Market's P/S Mean For Shareholders?
While the industry has experienced revenue growth lately, Goodfood Market's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
Want the full picture on analyst estimates for the company? Then our free report on Goodfood Market will help you uncover what's on the horizon.
What Are Revenue Growth Metrics Telling Us About The P/S?
The only time you'd be comfortable seeing a P/S like Goodfood Market's is when the company's growth is tracking the industry closely.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 37%. This means it has also seen a slide in revenue over the longer-term as revenue is down 41% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Shifting to the future, estimates from the dual analysts covering the company suggest revenue growth is heading into negative territory, declining 0.6% over the next year. With the industry predicted to deliver 6.4% growth, that's a disappointing outcome.
In light of this, it's somewhat alarming that Goodfood Market's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.
The Final Word
Following Goodfood Market's share price tumble, its P/S is just clinging on to the industry median P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
It appears that Goodfood Market currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.
It is also worth noting that we have found 4 warning signs for Goodfood Market (2 are concerning!) that you need to take into consideration.
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.
