Bellevue Gold Limited's (ASX:BGL) Price Is Right But Growth Is Lacking

Bellevue Gold Limited's (ASX:BGL) price-to-sales (or "P/S") ratio of 3.1x might make it look like a strong buy right now compared to the Metals and Mining industry in Australia, where around half of the companies have P/S ratios above 45.5x and even P/S above 310x 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 Bellevue Gold

What Does Bellevue Gold's P/S Mean For Shareholders?

Recent times have been advantageous for Bellevue Gold as its revenues have been rising faster than most other companies. 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 you 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.

Keen to find out how analysts think Bellevue Gold's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Bellevue Gold?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. In spite of this unbelievable short-term growth, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 23% per annum as estimated by the nine analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 129% per annum, which is noticeably more attractive.

With this information, we can see why Bellevue Gold 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 Bellevue Gold's P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Bellevue Gold maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Bellevue Gold with six simple checks will allow you to discover any risks that could be an issue.

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.

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.