The Market Doesn't Like What It Sees From Ora Banda Mining Limited's (ASX:OBM) Revenues Yet As Shares Tumble 25%

Unfortunately for some shareholders, the Ora Banda Mining Limited (ASX:OBM) share price has dived 25% in the last thirty days, prolonging recent pain. The good news is that in the last year, the stock has shone bright like a diamond, gaining 133%.

Even after such a large drop in price, Ora Banda Mining may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 4.8x, since almost half of all companies in the Metals and Mining industry in Australia have P/S ratios greater than 63.2x and even P/S higher than 418x are not unusual. 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.

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See our latest analysis for Ora Banda Mining

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

With revenue growth that's inferior to most other companies of late, Ora Banda Mining has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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.

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.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 83% gain to the company's top line. Pleasingly, revenue has also lifted 191% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 88% during the coming year according to the three analysts following the company. With the industry predicted to deliver 158% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Ora Banda Mining is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Shares in Ora Banda Mining have plummeted and its P/S has followed suit. 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.

As expected, our analysis of Ora Banda Mining's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Ora Banda Mining that you need to be mindful of.

If you're unsure about the strength of Ora Banda Mining's 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.