Aura Minerals Inc.'s (TSE:ORA) Shares Bounce 26% But Its Business Still Trails The Industry

Aura Minerals Inc. (TSE:ORA) shares have continued their recent momentum with a 26% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 88%.

Although its price has surged higher, Aura Minerals' price-to-sales (or "P/S") ratio of 1.7x might still make it look like a buy right now compared to the Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 3.3x and even P/S above 22x are quite common. 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

What Does Aura Minerals' P/S Mean For Shareholders?

Recent times have been advantageous for Aura Minerals 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is Aura Minerals' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Aura Minerals' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 36% last year. The latest three year period has also seen a 24% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 19% per year during the coming three years according to the three analysts following the company. That's shaping up to be materially lower than the 27% per 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

Aura Minerals' stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of Aura Minerals' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

You should always think about risks. Case in point, we've spotted 3 warning signs for Aura Minerals you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.