Lacklustre Performance Is Driving Atico Mining Corporation's (CVE:ATY) Low P/S

With a price-to-sales (or "P/S") ratio of 0.2x Atico Mining Corporation (CVE:ATY) may be sending very bullish signals at the moment, given that almost half of all the Metals and Mining companies in Canada have P/S ratios greater than 3.6x and even P/S higher than 22x 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 so limited.

Check out our latest analysis for Atico Mining

What Does Atico Mining's P/S Mean For Shareholders?

Atico Mining could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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.

Keen to find out how analysts think Atico Mining's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Atico Mining's Revenue Growth Trending?

Atico Mining'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 frustrating 4.5% decrease to the company's top line. As a result, revenue from three years ago have also fallen 15% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the only analyst following the company. With the industry predicted to deliver 22% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Atico Mining is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Atico Mining's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

You should always think about risks. Case in point, we've spotted 2 warning signs for Atico Mining you should be aware of, and 1 of them is potentially serious.

If you're unsure about the strength of Atico Mining's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.