The Price Is Right For i-80 Gold Corp. (TSE:IAU) Even After Diving 25%

The i-80 Gold Corp. (TSE:IAU) share price has softened a substantial 25% over the previous 30 days, handing back much of the gains the stock has made lately. For any long-term shareholders, the last month ends a year to forget by locking in a 56% share price decline.

Although its price has dipped substantially, i-80 Gold may still be sending sell signals at present with a price-to-sales (or "P/S") ratio of 5.1x, when you consider almost half of the companies in the Metals and Mining industry in Canada have P/S ratios under 3.4x and even P/S lower than 1.2x aren't out of the ordinary. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for i-80 Gold

How Has i-80 Gold Performed Recently?

i-80 Gold could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on i-80 Gold will help you uncover what's on the horizon.

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

i-80 Gold's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.3%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 66% each year during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 54% 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. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On i-80 Gold's P/S

i-80 Gold's P/S remain high even after its stock plunged. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into i-80 Gold shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for i-80 Gold (1 is a bit unpleasant!) that you need to be mindful of.

If you're unsure about the strength of i-80 Gold's 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.