Market Participants Recognise Avino Silver & Gold Mines Ltd.'s (TSE:ASM) Earnings Pushing Shares 30% Higher

Avino Silver & Gold Mines Ltd. (TSE:ASM) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. The last month tops off a massive increase of 161% in the last year.

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 45.8x, since almost half of all companies in Canada have P/E ratios under 14x and even P/E's lower than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Avino Silver & Gold Mines certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Avino Silver & Gold Mines

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Is There Enough Growth For Avino Silver & Gold Mines?

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 156% last year. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 82% per annum during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 11% each year growth forecast for the broader market.

In light of this, it's understandable that Avino Silver & Gold Mines' P/E 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

Shares in Avino Silver & Gold Mines have built up some good momentum lately, which has really inflated its P/E. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

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.

A lot of potential risks can sit within a 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 you're unsure about the strength of Avino Silver & Gold Mines' 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.