Yahoo Finance Market Still Lacking Some Conviction On Antioquia Gold Inc. (CVE:AGD)
Antioquia Gold Inc.'s (CVE:AGD) price-to-sales (or "P/S") ratio of 0.1x might make it look like a strong buy right now compared to the Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 2.7x and even P/S above 18x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Antioquia Gold
How Has Antioquia Gold Performed Recently?
Revenue has risen firmly for Antioquia Gold recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Antioquia Gold will help you shine a light on its historical performance.
Is There Any Revenue Growth Forecasted For Antioquia Gold?
There's an inherent assumption that a company should far underperform the industry for P/S ratios like Antioquia Gold's to be considered reasonable.
Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.
This is in contrast to the rest of the industry, which is expected to grow by 18% over the next year, materially lower than the company's recent medium-term annualised growth rates.
In light of this, it's peculiar that Antioquia Gold's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.
What We Can Learn From Antioquia Gold's P/S?
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.
Our examination of Antioquia Gold revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
You should always think about risks. Case in point, we've spotted 5 warning signs for Antioquia Gold you should be aware of, and 4 of them can't be ignored.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
