Aurelia Metals Limited (ASX:AMI) Stock Catapults 29% Though Its Price And Business Still Lag The Industry

Aurelia Metals Limited (ASX:AMI) shares have continued their recent momentum with a 29% gain in the last month alone. Looking further back, the 20% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Aurelia Metals may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.9x, since almost half of all companies in the Metals and Mining industry in Australia have P/S ratios greater than 90x and even P/S higher than 521x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

Check out our latest analysis for Aurelia Metals

How Aurelia Metals Has Been Performing

Aurelia Metals hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Aurelia Metals?

Aurelia Metals' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 14% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 2.3% as estimated by the four analysts watching the company. With the industry predicted to deliver 140% growth, that's a disappointing outcome.

In light of this, it's understandable that Aurelia Metals' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Key Takeaway

Aurelia Metals' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Aurelia Metals' P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Aurelia Metals' poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Having said that, be aware Aurelia Metals is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious.

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.