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Tiny Ltd. (CVE:TINY) shareholders are no doubt pleased to see that the share price has bounced 33% in the last month, although it is still struggling to make up recently lost ground. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.
Even after such a large jump in price, you could still be forgiven for feeling indifferent about Tiny's P/S ratio of 3.2x, since the median price-to-sales (or "P/S") ratio for the Software industry in Canada is also close to 3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
View our latest analysis for Tiny
What Does Tiny's Recent Performance Look Like?
Tiny could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. 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 our free report on Tiny.
How Is Tiny's Revenue Growth Trending?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Tiny's to be considered reasonable.
Retrospectively, the last year delivered an exceptional 21% gain to the company's top line. The latest three year period has also seen an excellent 106% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Turning to the outlook, the next year should generate growth of 26% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 18%, which is noticeably less attractive.
With this in consideration, we find it intriguing that Tiny's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.
What Does Tiny's P/S Mean For Investors?
Tiny's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.