Investors Still Aren't Entirely Convinced By Guanajuato Silver Company Ltd.'s (CVE:GSVR) Revenues Despite 39% Price Jump

Guanajuato Silver Company Ltd. (CVE:GSVR) shareholders are no doubt pleased to see that the share price has bounced 39% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 64% share price decline over the last year.

Even after such a large jump in price, Guanajuato Silver may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.9x, since almost half of all companies in the Metals and Mining industry in Canada have P/S ratios greater than 2.6x and even P/S higher than 15x 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 limited.

See our latest analysis for Guanajuato Silver

What Does Guanajuato Silver's Recent Performance Look Like?

Recent times have been advantageous for Guanajuato Silver as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

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

Guanajuato Silver's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 155% gain to the company's top line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 14% as estimated by the only analyst watching the company. That's shaping up to be materially higher than the 10% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Guanajuato Silver's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

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

Despite Guanajuato Silver's share price climbing recently, its P/S still lags most other companies. 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.

A look at Guanajuato Silver's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about these 4 warning signs we've spotted with Guanajuato Silver (including 1 which is concerning).

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).

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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.