Aris Mining Corporation (TSE:ARIS) Might Not Be As Mispriced As It Looks

Aris Mining Corporation's (TSE:ARIS) price-to-sales (or "P/S") ratio of 1.3x might make it look like a buy right now compared to the Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 2.9x and even P/S above 16x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Aris Mining

What Does Aris Mining's Recent Performance Look Like?

Aris Mining certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic 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 Aris Mining.

How Is Aris Mining's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Aris Mining's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 16% last year. Revenue has also lifted 22% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 26% per annum over the next three years. That's shaping up to be materially higher than the 22% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that Aris Mining's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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 Aris Mining currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you take the next step, you should know about the 1 warning sign for Aris Mining that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com