The Decibel Cannabis Company Inc. (CVE:DB) share price has fared very poorly over the last month, falling by a substantial 27%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 61% loss during that time.
Although its price has dipped substantially, it’s still not a stretch to say that Decibel Cannabis’ price-to-sales (or “P/S”) ratio of 0.3x right now seems quite “middle-of-the-road” compared to the Pharmaceuticals industry in Canada, where the median P/S ratio is around 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for Decibel Cannabis
TSXV:DB Price to Sales Ratio vs Industry April 12th 2025
What Does Decibel Cannabis’ Recent Performance Look Like?
While the industry has experienced revenue growth lately, Decibel Cannabis’ revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You’d really hope so, otherwise you’re paying a relatively elevated price for a company with this sort of growth profile.
If you’d like to see what analysts are forecasting going forward, you should check out ourfree report on Decibel Cannabis.
Do Revenue Forecasts Match The P/S Ratio?
There’s an inherent assumption that a company should be matching the industry for P/S ratios like Decibel Cannabis’ to be considered reasonable.
Retrospectively, the last year delivered a frustrating 4.3% decrease to the company’s top line. Still, the latest three year period has seen an excellent 105% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
Turning to the outlook, the next year should generate growth of 15% as estimated by the three analysts watching the company. That’s shaping up to be materially higher than the 8.8% growth forecast for the broader industry.
With this information, we find it interesting that Decibel Cannabis is trading at a fairly similar P/S compared to the industry. It may be that most investors aren’t convinced the company can achieve future growth expectations.
The Final Word
With its share price dropping off a cliff, the P/S for Decibel Cannabis looks to be in line with the rest of the Pharmaceuticals industry. 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.
Despite enticing revenue growth figures that outpace the industry, Decibel Cannabis’ P/S isn’t quite what we’d expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts’ forecasts, you may be able to pick up the stock at an attractive price.
You need to take note of risks, for example – Decibel Cannabis has 2 warning signs (and 1 which doesn’t sit too well with us) we think you should know about.
If you’re unsure about the strength of Decibel Cannabis’ business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
The Decibel Cannabis Company Inc. ( CVE:DB ) share price has fared very poorly over the last month, falling by a… Read More
