Silver X Mining Corp. (CVE:AGX) Stock Rockets 27% As Investors Are Less Pessimistic Than Expected

Silver X Mining Corp. (CVE:AGX) shares have continued their recent momentum with a 27% gain in the last month alone. The annual gain comes to 119% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Silver X Mining's P/S ratio of 5.3x, since the median price-to-sales (or "P/S") ratio for the Metals and Mining industry in Canada is also close to 6.1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Silver X Mining

What Does Silver X Mining's Recent Performance Look Like?

Silver X Mining could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Silver X Mining's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Silver X Mining's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 23% gain to the company's top line. The latest three year period has also seen an excellent 78% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 18% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 71%, which is noticeably more attractive.

With this information, we find it interesting that Silver X Mining is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

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

Silver X Mining appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look at the analysts forecasts of Silver X Mining's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Silver X Mining (1 is potentially serious!) that you should be aware of before investing here.

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.