Gold By Gold SA (EPA:ALGLD) Stock Rockets 50% But Many Are Still Ignoring The Company

Gold By Gold SA (EPA:ALGLD) shares have continued their recent momentum with a 50% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 35%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Gold By Gold's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Trade Distributors industry in France is also close to 0.4x. 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.

Check out our latest analysis for Gold By Gold

What Does Gold By Gold's Recent Performance Look Like?

The revenue growth achieved at Gold By Gold over the last year would be more than acceptable for most companies. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on Gold By Gold 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 Gold By Gold will help you shine a light on its historical performance.

How Is Gold By Gold's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Gold By Gold'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 23%. Pleasingly, revenue has also lifted 222% 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.

This is in contrast to the rest of the industry, which is expected to grow by 1.1% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Gold By Gold's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Gold By Gold's P/S

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

We've established that Gold By Gold currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You always need to take note of risks, for example - Gold By Gold has 3 warning signs we think 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.