The Market Lifts Luca Mining Corp. (CVE:LUCA) Shares 32% But It Can Do More

Luca Mining Corp. (CVE:LUCA) shares have continued their recent momentum with a 32% gain in the last month alone. The last 30 days were the cherry on top of the stock's 373% gain in the last year, which is nothing short of spectacular.

In spite of the firm bounce in price, there still wouldn't be many who think Luca Mining's price-to-sales (or "P/S") ratio of 3.2x is worth a mention when the median P/S in Canada's Metals and Mining industry is similar at about 3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Luca Mining

What Does Luca Mining's Recent Performance Look Like?

Luca Mining certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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 analyst estimates for the company? Then our free report on Luca Mining will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Luca Mining?

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

If we review the last year of revenue growth, the company posted a terrific increase of 52%. The strong recent performance means it was also able to grow revenue by 41% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 63% per year during the coming three years according to the two analysts following the company. That's shaping up to be materially higher than the 38% per annum growth forecast for the broader industry.

With this information, we find it interesting that Luca Mining is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

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

Luca Mining's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Looking at Luca Mining's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Before you settle on your opinion, we've discovered 2 warning signs for Luca Mining (1 doesn't sit too well with us!) that you should be aware of.

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.