Taseko Mines Limited (TSE:TKO) Shares Fly 26% But Investors Aren't Buying For Growth

The Taseko Mines Limited (TSE:TKO) share price has done very well over the last month, posting an excellent gain of 26%. Looking back a bit further, it's encouraging to see the stock is up 71% in the last year.

In spite of the firm bounce in price, Taseko Mines may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.1x, since almost half of all companies in the Metals and Mining industry in Canada have P/S ratios greater than 5.6x and even P/S higher than 34x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for Taseko Mines

How Has Taseko Mines Performed Recently?

Taseko Mines hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.

Want the full picture on analyst estimates for the company? Then our free report on Taseko Mines will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Taseko Mines?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period has seen an excellent 32% overall rise in revenue, in spite of its uninspiring short-term performance. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Looking ahead now, revenue is anticipated to climb by 27% each year during the coming three years according to the five analysts following the company. With the industry predicted to deliver 33% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Taseko Mines' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Taseko Mines' P/S

Despite Taseko Mines' share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Taseko Mines' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Taseko Mines with six simple checks.

If these risks are making you reconsider your opinion on Taseko Mines, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.