Benign Growth For Bowen Coking Coal Limited (ASX:BCB) Underpins Stock's 33% Plummet

To the annoyance of some shareholders, Bowen Coking Coal Limited (ASX:BCB) shares are down a considerable 33% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 78% loss during that time.

Following the heavy fall in price, Bowen Coking Coal's price-to-sales (or "P/S") ratio of 0.9x might make it look like a strong buy right now compared to the wider Metals and Mining industry in Australia, where around half of the companies have P/S ratios above 94.8x and even P/S above 519x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Bowen Coking Coal

How Bowen Coking Coal Has Been Performing

With revenue growth that's superior to most other companies of late, Bowen Coking Coal has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bowen Coking Coal.

How Is Bowen Coking Coal's Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Bowen Coking Coal's to be considered reasonable.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 49% each year over the next three years. That's shaping up to be materially lower than the 505% each year growth forecast for the broader industry.

With this information, we can see why Bowen Coking Coal is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Bowen Coking Coal's P/S

Bowen Coking Coal's P/S looks about as weak as its stock price lately. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As expected, our analysis of Bowen Coking Coal's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Bowen Coking Coal (1 is concerning!) that you need to be mindful of.

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.