What Avino Silver & Gold Mines Ltd.'s (TSE:ASM) 49% Share Price Gain Is Not Telling You

Despite an already strong run, Avino Silver & Gold Mines Ltd. (TSE:ASM) shares have been powering on, with a gain of 49% in the last thirty days. The last 30 days bring the annual gain to a very sharp 49%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Avino Silver & Gold Mines' P/S ratio of 3x, since the median price-to-sales (or "P/S") ratio for the Metals and Mining industry in Canada is about the same. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Avino Silver & Gold Mines

What Does Avino Silver & Gold Mines' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Avino Silver & Gold Mines has been relatively sluggish. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Avino Silver & Gold Mines' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

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 a decent 8.1% gain to the company's revenues. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were fairly tame in comparison. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 16% per annum over the next three years. With the industry predicted to deliver 21% growth each year, the company is positioned for a weaker revenue result.

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. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

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

Avino Silver & Gold Mines' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.

When you consider that Avino Silver & Gold Mines' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. 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. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Avino Silver & Gold Mines you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.