Positive Sentiment Still Eludes Trigon Metals Inc. (CVE:TM) Following 25% Share Price Slump

To the annoyance of some shareholders, Trigon Metals Inc. (CVE:TM) shares are down a considerable 25% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 32% share price drop.

In spite of the heavy fall in price, Trigon Metals' price-to-sales (or "P/S") ratio of 1.2x might still make it look like a buy right now compared to the Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 3x and even P/S above 18x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Trigon Metals

What Does Trigon Metals' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Trigon Metals has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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 out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Trigon Metals.

Is There Any Revenue Growth Forecasted For Trigon Metals?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Trigon Metals' to be considered reasonable.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Although, its longer-term performance hasn't been anywhere near as strong with three-year revenue growth being relatively non-existent overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 164% as estimated by the dual analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 33%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Trigon Metals' P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Trigon Metals' P/S Mean For Investors?

Trigon Metals' recently weak share price has pulled its P/S back below other Metals and Mining companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Trigon Metals' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Trigon Metals is showing 4 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable.

If these risks are making you reconsider your opinion on Trigon Metals, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.