Potential Upside For Americas Gold and Silver Corporation (TSE:USA) Not Without Risk

Americas Gold and Silver Corporation's (TSE:USA) price-to-sales (or "P/S") ratio of 0.7x might make it look like a strong buy right now compared to the Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 2.9x and even P/S above 19x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Americas Gold and Silver

What Does Americas Gold and Silver's P/S Mean For Shareholders?

Americas Gold and Silver could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Americas Gold and Silver.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Americas Gold and Silver's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a decent 7.8% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 180% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 39% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 32% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Americas Gold and Silver's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A look at Americas Gold and Silver's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for Americas Gold and Silver (2 are significant!) that you should be aware of.

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.