Even With A 28% Surge, Cautious Investors Are Not Rewarding Aris Mining Corporation's (TSE:ARIS) Performance Completely

Aris Mining Corporation (TSE:ARIS) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Looking further back, the 17% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Aris Mining's price-to-sales (or "P/S") ratio of 1.1x might still 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 2.6x and even P/S above 15x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Aris Mining

What Does Aris Mining's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Aris Mining has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Aris Mining will help you uncover what's on the horizon.

How Is Aris Mining's Revenue Growth Trending?

In order to justify its P/S ratio, Aris Mining would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. The solid recent performance means it was also able to grow revenue by 19% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 26% per annum during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 7.6% per annum, which is noticeably less attractive.

In light of this, it's peculiar that Aris Mining's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

The latest share price surge wasn't enough to lift Aris Mining's P/S close to 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.

Aris Mining's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You always need to take note of risks, for example - Aris Mining has 1 warning sign we think you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.