Improved Revenues Required Before Bear Creek Mining Corporation (CVE:BCM) Stock's 25% Jump Looks Justified

The Bear Creek Mining Corporation (CVE:BCM) share price has done very well over the last month, posting an excellent gain of 25%. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, Bear Creek Mining's price-to-sales (or "P/S") ratio of 0.8x might still 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 3.3x and even P/S above 21x 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.

View our latest analysis for Bear Creek Mining

What Does Bear Creek Mining's Recent Performance Look Like?

Bear Creek 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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bear Creek Mining.

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

Bear Creek 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 virtually the same number to the company's top line as the year before. That's essentially a continuation of what we've seen over the last three years, as its revenue growth has been virtually non-existent for that entire period. So it seems apparent to us that the company has struggled to grow revenue meaningfully over that time.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 3.7% each year over the next three years. With the industry predicted to deliver 27% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Bear Creek Mining's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Bear Creek Mining's P/S Mean For Investors?

Bear Creek Mining's recent share price jump still sees fails to bring its P/S alongside the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Bear Creek Mining maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Bear Creek Mining (1 is a bit unpleasant!) that you should be aware of.

If these risks are making you reconsider your opinion on Bear Creek Mining, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.