Those holding 22nd Century Group, Inc. (NASDAQ:XXII) shares would be relieved that the share price has rebounded 39% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 99% share price drop in the last twelve months.
Although its price has surged higher, considering around half the companies operating in the United States' Tobacco industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider 22nd Century Group as an solid investment opportunity with its 0.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
What Does 22nd Century Group's Recent Performance Look Like?
As an illustration, revenue has deteriorated at 22nd Century Group over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on 22nd Century Group will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on 22nd Century Group will help you shine a light on its historical performance.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
22nd Century Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
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 31% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
In contrast to the company, the rest of the industry is expected to grow by 1.5% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this in mind, we understand why 22nd Century Group's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.
The Final Word
22nd Century Group's stock price has surged recently, but its but its P/S still remains modest. 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.
As we suspected, our examination of 22nd Century Group revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.
Don't forget that there may be other risks. For instance, we've identified 5 warning signs for 22nd Century Group (4 don't sit too well with us) you should be aware of.
If these risks are making you reconsider your opinion on 22nd Century Group, explore our interactive list of high quality stocks to get an idea of what else is out there.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
持有22nd Century Group, Inc. (NASDAQ:XXII)股票的人將會鬆了一口氣,因爲該股在過去30天裏上漲了39%,但它需要保持。 30天的波動並沒有改變這樣一個事實,即長期股東看到在過去12個月裏,這支股票的股價下跌了99%。
雖然22nd Century Group的股價已經大幅上漲,但考慮到美國菸草行業中約一半以上的公司的市銷率(或“P / S”)超過1.2倍,您仍然可以考慮22nd Century Group作爲一個堅實的投資機會,因爲其市銷率爲0.4倍。儘管如此,我們仍需要深入挖掘一下,以確定這種降低的P / S是否有合理的基礎。
22nd Century Group的最近表現如何?
作爲一個例子,22nd Century Group的營收在過去一年裏有所惡化,這絕不是理想的狀態。一個可能的原因是,市銷率低是因爲投資者認爲該公司未來不會盡力避免在不久的將來表現不佳。看好22nd Century Group的人將希望這不是事實,以便他們可以在更低的估值下購買股票。
想要獲得該公司的收益,營收和現金流的全貌嗎?那麼我們關於22nd Century Group的免費報告將幫助您照亮其歷史表現。
營收增長指標告訴我們關於低市銷率的什麼?
22nd Century Group的市銷率對於一家預計提供有限增長並且重要的公司來說是典型的,並且表現不如行業板塊。