A Piece Of The Puzzle Missing From Ora Banda Mining Limited's (ASX:OBM) 32% Share Price Climb

Despite an already strong run, Ora Banda Mining Limited (ASX:OBM) shares have been powering on, with a gain of 32% in the last thirty days. This latest share price bounce rounds out a remarkable 427% gain over the last twelve months.

In spite of the firm bounce in price, Ora Banda Mining may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 6.5x, considering almost half of all companies in the Metals and Mining industry in Australia have P/S ratios greater than 73.9x and even P/S higher than 455x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Ora Banda Mining

What Does Ora Banda Mining's P/S Mean For Shareholders?

Ora Banda Mining could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Ora Banda Mining will help you uncover what's on the horizon.

How Is Ora Banda Mining's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 79% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 42%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Ora Banda Mining's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Ora Banda Mining's recent share price jump still sees fails to bring its P/S alongside the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

To us, it seems Ora Banda Mining 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for Ora Banda Mining you should be aware of.

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.

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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.