Investors Give Andean Precious Metals Corp. (CVE:APM) Shares A 38% Hiding

Andean Precious Metals Corp. (CVE:APM) shares have retraced a considerable 38% in the last month, reversing a fair amount of their solid recent performance. Looking at the bigger picture, even after this poor month the stock is up 83% in the last year.

Following the heavy fall in price, Andean Precious Metals' price-to-sales (or "P/S") ratio of 0.5x might make it look like a strong buy right now compared to the wider Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 2.8x and even P/S above 20x are quite common. 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.

Check out our latest analysis for Andean Precious Metals

How Andean Precious Metals Has Been Performing

Recent times have been advantageous for Andean Precious Metals as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Andean Precious Metals.

Is There Any Revenue Growth Forecasted For Andean Precious Metals?

In order to justify its P/S ratio, Andean Precious Metals would need to produce anemic growth that's substantially trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 125% last year. The strong recent performance means it was also able to grow revenue by 36% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 33% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 20%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Andean Precious Metals' 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.

What Does Andean Precious Metals' P/S Mean For Investors?

Having almost fallen off a cliff, Andean Precious Metals' share price has pulled its P/S way down as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To us, it seems Andean Precious Metals currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 3 warning signs for Andean Precious Metals (2 are concerning!) 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.