Stock Analysis

Santacruz Silver Mining Ltd. (CVE:SCZ) Stock Rockets 32% But Many Are Still Ignoring The Company

TSXV:SCZ
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Despite an already strong run, Santacruz Silver Mining Ltd. (CVE:SCZ) shares have been powering on, with a gain of 32% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

Even after such a large jump in price, Santacruz Silver Mining may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Metals and Mining industry in Canada have P/S ratios greater than 2.2x and even P/S higher than 15x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Santacruz Silver Mining

ps-multiple-vs-industry
TSXV:SCZ Price to Sales Ratio vs Industry December 22nd 2023

What Does Santacruz Silver Mining's P/S Mean For Shareholders?

Santacruz Silver Mining has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. Those who are bullish on Santacruz Silver Mining will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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.

Do Revenue Forecasts Match The Low P/S Ratio?

Santacruz Silver Mining'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.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. While this performance is only fair, the company was still able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 16% shows it's noticeably more attractive.

In light of this, it's peculiar that Santacruz Silver Mining's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

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

Santacruz Silver Mining's stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

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. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Santacruz Silver Mining (2 shouldn't be ignored) 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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

About TSXV:SCZ

Santacruz Silver Mining

Engages in the acquisition, exploration, development, and operation of mineral properties in Latin America.

Flawless balance sheet and good value.

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