Triple Flag Precious Metals Corp.'s (TSE:TFPM) Business Is Yet to Catch Up With Its Share Price

Triple Flag Precious Metals Corp.'s (TSE:TFPM) price-to-sales (or "P/S") ratio of 13.9x may look like a poor investment opportunity when you consider close to half the companies in the Metals and Mining industry in Canada have P/S ratios below 3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Triple Flag Precious Metals

How Triple Flag Precious Metals Has Been Performing

Recent revenue growth for Triple Flag Precious Metals has been in line with the industry. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Triple Flag Precious Metals.

Do Revenue Forecasts Match The High P/S Ratio?

Triple Flag Precious Metals' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 26%. The latest three year period has also seen an excellent 59% 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.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 3.9% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 34% per year, which is noticeably more attractive.

With this in consideration, we believe it doesn't make sense that Triple Flag Precious Metals' P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Triple Flag Precious Metals' P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Despite analysts forecasting some poorer-than-industry revenue growth figures for Triple Flag Precious Metals, this doesn't appear to be impacting the P/S in the slightest. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Triple Flag Precious Metals that you should be aware of.

If you're unsure about the strength of Triple Flag Precious Metals' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.