There Is A Reason BCI Minerals Limited's (ASX:BCI) Price Is Undemanding

You may think that with a price-to-sales (or "P/S") ratio of 6.1x BCI Minerals Limited (ASX:BCI) is definitely a stock worth checking out, seeing as almost half of all the Metals and Mining companies in Australia have P/S ratios greater than 98.9x and even P/S above 580x aren't out of the ordinary. 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 BCI Minerals

How BCI Minerals Has Been Performing

While the industry has experienced revenue growth lately, BCI Minerals' revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

How Is BCI Minerals' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as BCI Minerals' is when the company's growth is on track to lag the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.5%. The last three years don't look nice either as the company has shrunk revenue by 21% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 2.2% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 576% per annum, which is noticeably more attractive.

In light of this, it's understandable that BCI Minerals' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From BCI Minerals' P/S?

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.

As expected, our analysis of BCI Minerals' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

It is also worth noting that we have found 2 warning signs for BCI Minerals that you need to take into consideration.

If these risks are making you reconsider your opinion on BCI Minerals, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.