There's Reason For Concern Over Industrias Peñoles, S.A.B. de C.V.'s (BMV:PE&OLES) Massive 32% Price Jump

Industrias Peñoles, S.A.B. de C.V. (BMV:PE&OLES) shares have continued their recent momentum with a 32% gain in the last month alone. The last month tops off a massive increase of 186% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Industrias Peñoles. de's price-to-sales (or "P/S") ratio of 1.9x is worth a mention when it essentially matches the median P/S in Mexico's Metals and Mining industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Check out our latest analysis for Industrias Peñoles. de

How Has Industrias Peñoles. de Performed Recently?

With revenue growth that's superior to most other companies of late, Industrias Peñoles. de has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Industrias Peñoles. de's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Industrias Peñoles. de's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The latest three year period has also seen an excellent 31% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 4.4% as estimated by the five analysts watching the company. Meanwhile, the broader industry is forecast to expand by 0.6%, which paints a poor picture.

In light of this, it's somewhat alarming that Industrias Peñoles. de's P/S sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

What Does Industrias Peñoles. de's P/S Mean For Investors?

Industrias Peñoles. de appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

While Industrias Peñoles. de's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

Plus, you should also learn about this 1 warning sign we've spotted with Industrias Peñoles. de.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.