AngloGold Ashanti plc (NYSE:AU) Stocks Shoot Up 29% But Its P/S Still Looks Reasonable

Despite an already strong run, AngloGold Ashanti plc (NYSE:AU) shares have been powering on, with a gain of 29% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 90% in the last year.

After such a large jump in price, when almost half of the companies in the United States' Metals and Mining industry have price-to-sales ratios (or "P/S") below 1.3x, you may consider AngloGold Ashanti as a stock probably not worth researching with its 3.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for AngloGold Ashanti

What Does AngloGold Ashanti's Recent Performance Look Like?

Recent times have been advantageous for AngloGold Ashanti as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as AngloGold Ashanti's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. As a result, it also grew revenue by 21% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 15% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.0% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why AngloGold Ashanti's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On AngloGold Ashanti's P/S

AngloGold Ashanti shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

We've established that AngloGold Ashanti maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Metals and Mining industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for AngloGold Ashanti that we have uncovered.

If these risks are making you reconsider your opinion on AngloGold Ashanti, 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.