Earnings Tell The Story For Avino Silver & Gold Mines Ltd. (TSE:ASM) As Its Stock Soars 31%

Avino Silver & Gold Mines Ltd. (TSE:ASM) shareholders have had their patience rewarded with a 31% share price jump in the last month. This latest share price bounce rounds out a remarkable 404% gain over the last twelve months.

Since its price has surged higher, Avino Silver & Gold Mines may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 41x, since almost half of all companies in Canada have P/E ratios under 16x and even P/E's lower than 9x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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Avino Silver & Gold Mines certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Avino Silver & Gold Mines

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

What Are Growth Metrics Telling Us About The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Avino Silver & Gold Mines' is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 444% last year. The latest three year period has also seen an excellent 238% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 62% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 24% growth forecast for the broader market.

With this information, we can see why Avino Silver & Gold Mines is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

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

We've established that Avino Silver & Gold Mines maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E 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 1 warning sign for Avino Silver & Gold Mines that we have uncovered.

You might be able to find a better investment than Avino Silver & Gold Mines. If you want a selection of possible candidates, 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.