Avino Silver & Gold Mines Ltd.'s (TSE:ASM) 29% Share Price Surge Not Quite Adding Up

Despite an already strong run, Avino Silver & Gold Mines Ltd. (TSE:ASM) shares have been powering on, with a gain of 29% in the last thirty days. This latest share price bounce rounds out a remarkable 387% gain over the last twelve months.

After such a large jump in price, Avino Silver & Gold Mines' price-to-sales (or "P/S") ratio of 10.2x might make it look like a strong sell right now compared to other companies in the Metals and Mining industry in Canada, where around half of the companies have P/S ratios below 5.6x and even P/S below 2x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

View our latest analysis for Avino Silver & Gold Mines

How Has Avino Silver & Gold Mines Performed Recently?

With revenue growth that's superior to most other companies of late, Avino Silver & Gold Mines has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Avino Silver & Gold Mines will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Avino Silver & Gold Mines would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 53% last year. Pleasingly, revenue has also lifted 152% 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 5.5% per annum during the coming three years according to the four analysts following the company. With the industry predicted to deliver 36% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's alarming that Avino Silver & Gold Mines' P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

What We Can Learn From Avino Silver & Gold Mines' P/S?

The strong share price surge has lead to Avino Silver & Gold Mines' P/S soaring as well. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It comes as a surprise to see Avino Silver & Gold Mines trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Avino Silver & Gold Mines with six simple checks on some of these key factors.

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).

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

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.