Positive Sentiment Still Eludes Bushveld Minerals Limited (LON:BMN) Following 33% Share Price Slump

Bushveld Minerals Limited (LON:BMN) shares have had a horrible month, losing 33% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 70% loss during that time.

Since its price has dipped substantially, it would be understandable if you think Bushveld Minerals is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.2x, considering almost half the companies in the United Kingdom's Metals and Mining industry have P/S ratios above 1.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Bushveld Minerals

How Bushveld Minerals Has Been Performing

With its revenue growth in positive territory compared to the declining revenue of most other companies, Bushveld Minerals has been doing quite well of late. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. 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.

Want the full picture on analyst estimates for the company? Then our free report on Bushveld Minerals will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Bushveld Minerals?

The only time you'd be truly comfortable seeing a P/S as low as Bushveld Minerals' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 11%. The latest three year period has also seen an excellent 85% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 9.4% per year as estimated by the three analysts watching the company. With the industry only predicted to deliver 0.08% per year, the company is positioned for a stronger revenue result.

With this information, we find it odd that Bushveld Minerals is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Bushveld Minerals' P/S

Bushveld Minerals' recently weak share price has pulled its P/S back below other Metals and Mining companies. 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.

To us, it seems Bushveld Minerals currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Bushveld Minerals (at least 2 which can't be ignored), and understanding them should be part of your investment process.

If you're unsure about the strength of Bushveld Minerals' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.