Market Participants Recognise Sigma Lithium Corporation's (NASDAQ:SGML) Revenues Pushing Shares 37% Higher

Despite an already strong run, Sigma Lithium Corporation (NASDAQ:SGML) shares have been powering on, with a gain of 37% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 21% is also fairly reasonable.

Since its price has surged higher, you could be forgiven for thinking Sigma Lithium is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 10.8x, considering almost half the companies in the United States' Metals and Mining industry have P/S ratios below 2.3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Sigma Lithium

How Sigma Lithium Has Been Performing

Sigma Lithium could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Sigma Lithium?

In order to justify its P/S ratio, Sigma Lithium would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 2.1%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 52% per annum during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 17% per year growth forecast for the broader industry.

With this information, we can see why Sigma Lithium is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

The strong share price surge has lead to Sigma Lithium's P/S soaring as well. 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 look into Sigma Lithium shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You need to take note of risks, for example - Sigma Lithium has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

If these risks are making you reconsider your opinion on Sigma Lithium, 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.