Even With A 50% Surge, Cautious Investors Are Not Rewarding Antioquia Gold Inc.'s (CVE:AGD) Performance Completely

Antioquia Gold Inc. (CVE:AGD) shareholders would be excited to see that the share price has had a great month, posting a 50% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 63% share price drop in the last twelve months.

In spite of the firm bounce in price, Antioquia Gold may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Metals and Mining industry in Canada have P/S ratios greater than 2.8x and even P/S higher than 22x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for Antioquia Gold

How Has Antioquia Gold Performed Recently?

Recent times have been quite advantageous for Antioquia Gold as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. 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 Antioquia Gold will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as depressed as Antioquia Gold's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 41% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's peculiar that Antioquia Gold's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Antioquia Gold's P/S Mean For Investors?

Shares in Antioquia Gold have risen appreciably however, its P/S is still subdued. 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.

Our examination of Antioquia Gold revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Antioquia Gold (2 don't sit too well with us) you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.