Market Might Still Lack Some Conviction On Santacruz Silver Mining Ltd. (CVE:SCZ) Even After 46% Share Price Boost

Santacruz Silver Mining Ltd. (CVE:SCZ) shareholders would be excited to see that the share price has had a great month, posting a 46% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 36% over that time.

Even after such a large jump in price, Santacruz Silver Mining's price-to-sales (or "P/S") ratio of 0.3x might still make it look like a strong buy right now compared to the wider Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 2.9x and even P/S above 16x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Santacruz Silver Mining

What Does Santacruz Silver Mining's Recent Performance Look Like?

The revenue growth achieved at Santacruz Silver Mining over the last year would be more than acceptable for most companies. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Santacruz Silver Mining?

Santacruz Silver Mining's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were fairly tame in comparison. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 10% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that Santacruz Silver Mining is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Even after such a strong price move, Santacruz Silver Mining's P/S still trails the rest of the industry. 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.

Our examination of Santacruz Silver Mining revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It is also worth noting that we have found 4 warning signs for Santacruz Silver Mining (2 are potentially serious!) that you need to take into consideration.

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.