Revenues Working Against Fortuna Mining Corp.'s (TSE:FVI) Share Price

Fortuna Mining Corp.'s (TSE:FVI) price-to-sales (or "P/S") ratio of 1.5x might make it look like a buy right now compared to the Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 3.1x and even P/S above 20x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Fortuna Mining

What Does Fortuna Mining's Recent Performance Look Like?

Fortuna Mining certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Keen to find out how analysts think Fortuna Mining's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Fortuna Mining's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Fortuna Mining's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 49% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 134% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 4.6% over the next year. That's not great when the rest of the industry is expected to grow by 32%.

With this in consideration, we find it intriguing that Fortuna Mining's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Fortuna Mining's P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Fortuna Mining's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Fortuna Mining is showing 3 warning signs in our investment analysis, you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.