Market Participants Recognise Almonty Industries Inc.'s (TSE:AII) Revenues Pushing Shares 25% Higher

Almonty Industries Inc. (TSE:AII) shareholders have had their patience rewarded with a 25% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 71%.

Since its price has surged higher, you could be forgiven for thinking Almonty Industries is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 8.5x, considering almost half the companies in Canada's Metals and Mining industry have P/S ratios below 3x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Almonty Industries

How Almonty Industries Has Been Performing

With revenue growth that's inferior to most other companies of late, Almonty Industries has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Almonty Industries' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as Almonty Industries' is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 6.3%. The latest three year period has also seen a 21% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next three years should generate growth of 99% per year as estimated by the only analyst watching the company. With the industry only predicted to deliver 31% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Almonty Industries' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Almonty Industries' P/S has grown nicely over the last month thanks to a handy boost in the share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into Almonty Industries shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 2 warning signs for Almonty Industries (1 shouldn't be ignored!) that we have uncovered.

If you're unsure about the strength of Almonty Industries' 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.