Aura Minerals Inc.'s (TSE:ORA) Price Is Right But Growth Is Lacking After Shares Rocket 27%

Despite an already strong run, Aura Minerals Inc. (TSE:ORA) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 29%.

Although its price has surged higher, Aura Minerals may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.5x, since almost half of all companies in the Metals and Mining industry in Canada have P/S ratios greater than 2.9x and even P/S higher than 16x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Aura Minerals

How Has Aura Minerals Performed Recently?

Recent times have been advantageous for Aura Minerals as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Aura Minerals.

How Is Aura Minerals' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 20%. Revenue has also lifted 26% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 12% per annum during the coming three years according to the three analysts following the company. That's shaping up to be materially lower than the 21% each year growth forecast for the broader industry.

With this in consideration, its clear as to why Aura Minerals' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The latest share price surge wasn't enough to lift Aura Minerals' P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As expected, our analysis of Aura Minerals' 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.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Aura Minerals (of which 1 is potentially serious!) 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.