Why We're Not Concerned About i-80 Gold Corp.'s (TSE:IAU) Share Price

When you see that almost half of the companies in the Metals and Mining industry in Canada have price-to-sales ratios (or "P/S") below 3x, i-80 Gold Corp. (TSE:IAU) looks to be giving off strong sell signals with its 7.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for i-80 Gold

What Does i-80 Gold's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, i-80 Gold has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on i-80 Gold.

Is There Enough Revenue Growth Forecasted For i-80 Gold?

The only time you'd be truly comfortable seeing a P/S as steep as i-80 Gold's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 49% gain to the company's top line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 92% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 16% per annum, which is noticeably less attractive.

In light of this, it's understandable that i-80 Gold's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into i-80 Gold shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - i-80 Gold has 1 warning sign we think you should be aware 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.