Pantoro Gold Limited (ASX:PNR) Stock Catapults 30% Though Its Price And Business Still Lag The Industry

Pantoro Gold Limited (ASX:PNR) shares have continued their recent momentum with a 30% gain in the last month alone. The last month tops off a massive increase of 130% in the last year.

Even after such a large jump in price, Pantoro Gold may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 4.5x, considering almost half of all companies in the Metals and Mining industry in Australia have P/S ratios greater than 61.7x and even P/S higher than 334x 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.

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Check out our latest analysis for Pantoro Gold

How Has Pantoro Gold Performed Recently?

Recent times haven't been great for Pantoro Gold as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Pantoro Gold.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Taking a look back first, we see that the company grew revenue by an impressive 97% last year. The latest three year period has also seen an excellent 241% overall rise in revenue, aided by its 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 four analysts covering the company suggest revenue should grow by 45% over the next year. That's shaping up to be materially lower than the 62% growth forecast for the broader industry.

With this in consideration, its clear as to why Pantoro Gold's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Pantoro Gold's P/S?

Pantoro Gold's recent share price jump still sees fails to bring its P/S alongside the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As expected, our analysis of Pantoro Gold's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Pantoro Gold you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.