The price of Flora Growth Corp. (NASDAQ:FLGC) is right, but growth is lacking after shares rose 28%

Flora Growth Corp. (NASDAQ:FLGC) shares have continued their recent momentum with a gain of 28% in the last month alone. Looking back a little further, it’s encouraging to see that the stock is up 34% in the last year.

Although the price has risen, Flora Growth may still be sending bullish signals with its price-to-sales (or “P/S”) ratio of 0.4x at the moment, as almost half of all companies in the personal products industry are in the US In the United States, P/S ratios are above 1.5x, and even P/S ratios above 4x are not uncommon. However, it is not advisable to simply take the P/S at face value as there may be an explanation as to why it is capped.

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What is Flora Growth’s recent performance?

Flora Growth hasn’t been performing well recently, as its declining sales compare poorly to other companies that have, on average, experienced some sales growth. It seems that many expect the poor sales performance to continue, which has depressed the price-to-earnings ratio. If this is the case, existing shareholders will likely have difficulty getting excited about the future direction of the share price.

Want to know how analysts think Flora Growth’s future compares to the industry? In this case ours free The report is a good start.

Is Flora Growth forecast to see revenue growth?

To justify its P/E ratio, Flora Growth would have to deliver slow growth that lags the industry.

Looking back first, the company’s revenue growth last year was nothing to cheer about, as it posted a disappointing decline of 6.5%. The last three-year period has seen an incredible increase in overall sales, a stark contrast to the last 12 months. Accordingly, shareholders will be happy, but they also have some serious questions to consider about the last 12 months.

As for the outlook, next year is expected to generate growth of 0.5%, according to estimates from the three analysts covering the company. However, growth of 3.3% is forecast for the rest of the industry, which is much more attractive.

With this in mind, it’s understandable that Flora Growth’s P/E ratio is lower than most other companies. It seems that most investors expect limited future growth and are only willing to pay a lower amount for the stock.

What can we learn from Flora Growth’s P/S?

Although Flora Growth’s share price has risen recently, its P/E ratio still lags behind most other companies. It is argued that the price-to-sales ratio is a poorer indicator of value in certain industries, but can be a powerful indicator of business sentiment.

As we suspected, our review of Flora Growth’s analyst forecasts found that the weaker revenue outlook is contributing to the low P/E ratio. Shareholder pessimism about the company’s revenue prospects appears to be the main reason for the low P/E ratio. Under these circumstances, it is hard to imagine that the share price will rise much in the near future.

Before you take the next step, you should be clear about this 5 warning signs of plant growth (3 are potentially serious!) that we uncovered.

If you like strong companies that make profits, then you should check this out free List of interesting companies that trade on a low P/E ratio (but have proven they can grow profits).

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.