Improved Revenues Required Before Titan Mining Corporation (TSE:TI) Shares Find Their Feet

With a price-to-sales (or "P/S") ratio of 0.5x Titan Mining Corporation (TSE:TI) may be sending very bullish signals at the moment, given that almost half of all the Metals and Mining companies in Canada have P/S ratios greater than 3.1x and even P/S higher than 24x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Titan Mining

How Has Titan Mining Performed Recently?

For example, consider that Titan Mining's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling 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 Titan Mining will help you shine a light on its historical performance.

How Is Titan Mining's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 3.2% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 87% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's understandable that Titan Mining's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Titan Mining's P/S?

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.

Our examination of Titan Mining confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

It is also worth noting that we have found 2 warning signs for Titan Mining (1 shouldn't be ignored!) that you need to take into consideration.

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.