Ora Banda Mining Limited's (ASX:OBM) Price Is Right But Growth Is Lacking After Shares Rocket 34%

Ora Banda Mining Limited (ASX:OBM) shares have continued their recent momentum with a 34% gain in the last month alone. The last 30 days were the cherry on top of the stock's 600% gain in the last year, which is nothing short of spectacular.

Although its price has surged higher, Ora Banda Mining may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 7x, since almost half of all companies in the Metals and Mining industry in Australia have P/S ratios greater than 63x and even P/S higher than 307x are not unusual. 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 Ora Banda Mining

How Has Ora Banda Mining Performed Recently?

Ora Banda Mining could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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 Ora Banda Mining'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 Ora Banda Mining?

Ora Banda Mining's 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.

Taking a look back first, we see that the company grew revenue by an impressive 58% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 40% per annum over the next three years. That's shaping up to be materially lower than the 559% each year growth forecast for the broader industry.

In light of this, it's understandable that Ora Banda Mining's 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.

What We Can Learn From Ora Banda Mining's P/S?

Even after such a strong price move, Ora Banda Mining's 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.

As we suspected, our examination of Ora Banda Mining's 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.

Plus, you should also learn about these 2 warning signs we've spotted with Ora Banda Mining (including 1 which makes us a bit uncomfortable).

If these risks are making you reconsider your opinion on Ora Banda Mining, 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.