Starcore International Mines Ltd. (TSE:SAM) Stock Catapults 43% Though Its Price And Business Still Lag The Industry

Starcore International Mines Ltd. (TSE:SAM) shares have had a really impressive month, gaining 43% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 38%.

In spite of the firm bounce in price, Starcore International Mines' price-to-sales (or "P/S") ratio of 0.4x might still make it look like a strong buy right now compared to the wider Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 3.4x and even P/S above 22x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Starcore International Mines

How Starcore International Mines Has Been Performing

With revenue growth that's exceedingly strong of late, Starcore International Mines has been doing very well. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Starcore International Mines will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Starcore International Mines?

In order to justify its P/S ratio, Starcore International Mines would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 38% gain to the company's top line. As a result, it also grew revenue by 25% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 20% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Starcore International Mines is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

Starcore International Mines' recent share price jump still sees fails to bring its P/S alongside the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

In line with expectations, Starcore International Mines maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Having said that, be aware Starcore International Mines is showing 3 warning signs in our investment analysis, and 2 of those can't be ignored.

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.