Genesis Minerals Limited (ASX:GMD) Held Back By Insufficient Growth Even After Shares Climb 26%

Genesis Minerals Limited (ASX:GMD) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 101% in the last year.

Even after such a large jump in price, Genesis Minerals' price-to-sales (or "P/S") ratio of 8.2x might still 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 56x and even P/S above 315x are quite common. 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 Genesis Minerals

What Does Genesis Minerals' Recent Performance Look Like?

Recent times have been advantageous for Genesis Minerals as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Keen to find out how analysts think Genesis Minerals' 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 Genesis Minerals?

Genesis Minerals' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

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. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 35% each year as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 567% per year, which is noticeably more attractive.

In light of this, it's understandable that Genesis Minerals' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Genesis Minerals' P/S

Even after such a strong price move, Genesis Minerals' P/S still trails the rest of the industry. 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.

We've established that Genesis Minerals maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Genesis Minerals with six simple checks.

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

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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.