There's Reason For Concern Over Avino Silver & Gold Mines Ltd.'s (TSE:ASM) Massive 34% Price Jump

Avino Silver & Gold Mines Ltd. (TSE:ASM) shares have had a really impressive month, gaining 34% after a shaky period beforehand. The last month tops off a massive increase of 155% in the last year.

Even after such a large jump in price, it's still not a stretch to say that Avino Silver & Gold Mines' price-to-sales (or "P/S") ratio of 3.2x right now seems quite "middle-of-the-road" compared to the Metals and Mining industry in Canada, where the median P/S ratio is around 3.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Avino Silver & Gold Mines

How Avino Silver & Gold Mines Has Been Performing

With revenue growth that's superior to most other companies of late, Avino Silver & Gold Mines has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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.

How Is Avino Silver & Gold Mines' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Avino Silver & Gold Mines' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 18% per annum over the next three years. That's shaping up to be materially lower than the 28% each year growth forecast for the broader industry.

In light of this, it's curious that Avino Silver & Gold Mines' P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Avino Silver & Gold Mines' P/S

Avino Silver & Gold Mines appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look at the analysts forecasts of Avino Silver & Gold Mines' revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Avino Silver & Gold Mines you should know about.

If these risks are making you reconsider your opinion on Avino Silver & Gold Mines, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.