Even With A 59% Surge, Cautious Investors Are Not Rewarding Corsa Coal Corp.'s (CVE:CSO) Performance Completely

Those holding Corsa Coal Corp. (CVE:CSO) shares would be relieved that the share price has rebounded 59% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 54% share price decline over the last year.

Although its price has surged higher, Corsa Coal 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 3.3x 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.

Check out our latest analysis for Corsa Coal

How Has Corsa Coal Performed Recently?

As an illustration, revenue has deteriorated at Corsa Coal over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Corsa Coal's earnings, revenue and cash flow.

How Is Corsa Coal's Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 11%. Even so, admirably revenue has lifted 75% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 20% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it odd that Corsa Coal is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

What Does Corsa Coal's P/S Mean For Investors?

Shares in Corsa Coal have risen appreciably however, its P/S is still subdued. 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.

The fact that Corsa Coal currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Corsa Coal (1 doesn't sit too well with us!) that you should be aware of before investing here.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.