Revenues Tell The Story For IMPACT Silver Corp. (CVE:IPT) As Its Stock Soars 52%

Despite an already strong run, IMPACT Silver Corp. (CVE:IPT) shares have been powering on, with a gain of 52% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 3.2% isn't as attractive.

Although its price has surged higher, it's still not a stretch to say that IMPACT Silver's price-to-sales (or "P/S") ratio of 3.3x 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 3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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 that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Although there are no analyst estimates available for IMPACT Silver, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

IMPACT Silver's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 27% last year. Pleasingly, revenue has also lifted 33% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 12% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why IMPACT Silver is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What Does IMPACT Silver's P/S Mean For Investors?

IMPACT Silver appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

It appears to us that IMPACT Silver maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

There are also other vital risk factors to consider and we've discovered 3 warning signs for IMPACT Silver (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

If you're unsure about the strength of IMPACT Silver'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.