Stock Analysis

Further Upside For Catalyst Metals Limited (ASX:CYL) Shares Could Introduce Price Risks After 26% Bounce

ASX:CYL
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Those holding Catalyst Metals Limited (ASX:CYL) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 30% over that time.

Even after such a large jump in price, Catalyst 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 86.1x and even P/S higher than 458x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Catalyst Metals

ps-multiple-vs-industry
ASX:CYL Price to Sales Ratio vs Industry March 14th 2024

What Does Catalyst Metals' Recent Performance Look Like?

Recent times haven't been great for Catalyst Metals as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Catalyst Metals' 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 Catalyst Metals?

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

Retrospectively, the last year delivered an exceptional 154% gain to the company's top line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 71% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 23% growth forecast for the broader industry.

With this information, we find it odd that Catalyst Metals is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Even after such a strong price move, Catalyst Metals' P/S still trails the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To us, it seems Catalyst Metals currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 3 warning signs for Catalyst Metals that you need to take into consideration.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Catalyst Metals is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.