Catalyst Metals Limited's (ASX:CYL) Share Price Boosted 30% But Its Business Prospects Need A Lift Too

Catalyst Metals Limited (ASX:CYL) shares have continued their recent momentum with a 30% gain in the last month alone. The last 30 days were the cherry on top of the stock's 379% gain in the last year, which is nothing short of spectacular.

Even after such a large jump in price, Catalyst Metals may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 2.5x, considering almost half of all companies in the Metals and Mining industry in Australia have P/S ratios greater than 63.5x and even P/S higher than 314x 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.

View our latest analysis for Catalyst Metals

What Does Catalyst Metals' Recent Performance Look Like?

Catalyst Metals certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 Catalyst Metals.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Catalyst Metals would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an explosive gain to the company's top line. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 31% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 515% per year, which is noticeably more attractive.

In light of this, it's understandable that Catalyst Metals' 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.

The Bottom Line On Catalyst Metals' P/S

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

As we suspected, our examination of Catalyst Metals' analyst forecasts revealed that its inferior revenue outlook is contributing 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. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Catalyst Metals you should know about.

If you're unsure about the strength of Catalyst Metals' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.