i-80 Gold Corp. (TSE:IAU) Not Lagging Industry On Growth Or Pricing

i-80 Gold Corp.'s (TSE:IAU) price-to-sales (or "P/S") ratio of 8.3x might make it look like a strong sell right now compared to the Metals and Mining industry in Canada, where around half of the companies have P/S ratios below 3.6x and even P/S below 1.6x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for i-80 Gold

What Does i-80 Gold's P/S Mean For Shareholders?

i-80 Gold hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think i-80 Gold's future stacks up against the industry? In that case, our free report is a great place to start.

How Is i-80 Gold's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like i-80 Gold's to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 4.8%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 81% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 58% per annum, which is noticeably less attractive.

With this in mind, it's not hard to understand why i-80 Gold's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of i-80 Gold's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware i-80 Gold is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on i-80 Gold, 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.