Flora Growth Corp. (NASDAQ:FLGC) shares have retraced a considerable 25% in the last month, reversing a fair amount of their solid recent performance. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 62% loss during that time.

Since its price has dipped substantially, Flora Growth may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Personal Products industry in the United States have P/S ratios greater than 1.7x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Flora Growth's Recent Performance Look Like?

Flora Growth certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Flora Growth will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Flora Growth would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 128% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 8.7% during the coming year according to the dual analysts following the company. With the industry predicted to deliver 8.1% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Flora Growth is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Flora Growth's P/S?

Flora Growth's recently weak share price has pulled its P/S back below other Personal Products companies. 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.

It looks to us like the P/S figures for Flora Growth remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Plus, you should also learn about these 4 warning signs we've spotted with Flora Growth (including 2 which don't sit too well with us).

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.