Yahoo Finance The Market Lifts Mako Mining Corp. (CVE:MKO) Shares 42% But It Can Do More
Mako Mining Corp. (CVE:MKO) shareholders have had their patience rewarded with a 42% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 54% in the last year.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Mako Mining's P/S ratio of 1.7x, since the median price-to-sales (or "P/S") ratio for the Metals and Mining industry in Canada is also close to 1.9x. 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.
View our latest analysis for Mako Mining
How Mako Mining Has Been Performing
As an illustration, revenue has deteriorated at Mako Mining over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Mako Mining's earnings, revenue and cash flow.
How Is Mako Mining's Revenue Growth Trending?
Mako Mining's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. In spite of this, the company still managed to deliver immense revenue growth over the last three years. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.
When compared to the industry's one-year growth forecast of 17%, the most recent medium-term revenue trajectory is noticeably more alluring
In light of this, it's curious that Mako Mining's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.
The Bottom Line On Mako Mining's P/S
Its shares have lifted substantially and now Mako Mining's P/S is back within range of the industry median. 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.
We didn't quite envision Mako Mining's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.
Before you take the next step, you should know about the 1 warning sign for Mako Mining that we have uncovered.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
