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It's not a stretch to say that Cleantek Industries Inc.'s (CVE:CTEK) price-to-sales (or "P/S") ratio of 0.4x seems quite "middle-of-the-road" for Energy Services companies in Canada, seeing as it matches the P/S ratio of the wider industry. 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 Cleantek Industries
What Does Cleantek Industries' Recent Performance Look Like?
Recent times haven't been great for Cleantek Industries as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Cleantek Industries.
Is There Some Revenue Growth Forecasted For Cleantek Industries?
The only time you'd be comfortable seeing a P/S like Cleantek Industries' is when the company's growth is tracking the industry closely.
If we review the last year of revenue growth, the company posted a terrific increase of 19%. The latest three year period has also seen an excellent 88% overall rise in revenue, aided by its short-term performance. 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 year should demonstrate the company's robustness, generating growth of 18% as estimated by the sole analyst watching the company. Meanwhile, the broader industry is forecast to contract by 12%, which would indicate the company is doing very well.
With this in mind, we find it intriguing that Cleantek Industries' P/S trades in-line with its industry peers. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.
The Key Takeaway
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our examination of Cleantek Industries' analyst forecasts revealed that its superior revenue outlook against a shaky industry isn't resulting in the company trading at a higher P/S, as per our expectations. We assume that investors are attributing some risk to the company's future revenues, keeping it from trading at a higher P/S. Perhaps there is some hesitation about the company's ability to keep swimming against the current of the broader industry turmoil. It appears some are indeed anticipating revenue instability, because the company's current prospects should normally provide a boost to the share price.