OceanaGold Corporation's (TSE:OGC) Share Price Boosted 27% But Its Business Prospects Need A Lift Too

Despite an already strong run, OceanaGold Corporation (TSE:OGC) shares have been powering on, with a gain of 27% in the last thirty days. The last month tops off a massive increase of 193% in the last year.

Although its price has surged higher, OceanaGold may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 3.7x, considering almost half of all companies in the Metals and Mining industry in Canada have P/S ratios greater than 6.1x and even P/S higher than 43x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for OceanaGold

What Does OceanaGold's P/S Mean For Shareholders?

Recent times have been advantageous for OceanaGold as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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Is There Any Revenue Growth Forecasted For OceanaGold?

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

Taking a look back first, we see that the company grew revenue by an impressive 56% last year. The latest three year period has also seen an excellent 69% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 30% as estimated by the two analysts watching the company. That's shaping up to be materially lower than the 63% growth forecast for the broader industry.

With this information, we can see why OceanaGold is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On OceanaGold's P/S

Despite OceanaGold's share price climbing recently, its P/S still lags most other companies. 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.

As expected, our analysis of OceanaGold's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for OceanaGold with six simple checks will allow you to discover any risks that could be an issue.

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.