IMPACT Silver Corp.'s (CVE:IPT) 26% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

IMPACT Silver Corp. (CVE:IPT) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 26% share price drop.

In spite of the heavy fall in price, it's still not a stretch to say that IMPACT Silver's price-to-sales (or "P/S") ratio of 2.4x right now seems quite "middle-of-the-road" compared to the Metals and Mining industry in Canada, where the median P/S ratio is around 2.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for IMPACT Silver

How IMPACT Silver Has Been Performing

Revenue has risen firmly for IMPACT Silver recently, which is pleasing to see. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on IMPACT Silver will help you shine a light on its historical performance.

How Is IMPACT Silver's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like IMPACT Silver's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. The latest three year period has also seen a 20% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 18% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that IMPACT Silver's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Final Word

Following IMPACT Silver's share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that IMPACT Silver's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

You should always think about risks. Case in point, we've spotted 3 warning signs for IMPACT Silver you should be aware of, and 1 of them is a bit unpleasant.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.