Some Confidence Is Lacking In Hecla Mining Company's (NYSE:HL) P/S

When you see that almost half of the companies in the Metals and Mining industry in the United States have price-to-sales ratios (or "P/S") below 1.3x, Hecla Mining Company (NYSE:HL) looks to be giving off some sell signals with its 2.7x 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.

View our latest analysis for Hecla Mining

How Hecla Mining Has Been Performing

With its revenue growth in positive territory compared to the declining revenue of most other companies, Hecla Mining has been doing quite well of late. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

Hecla Mining's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.4% last year. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. 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 2.7% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 12%, which is noticeably more attractive.

With this in consideration, we believe it doesn't make sense that Hecla Mining's P/S is outpacing its industry peers. 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 this level of revenue growth is likely to weigh heavily on the share price eventually.

The Final Word

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.

We've concluded that Hecla Mining currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. At these price levels, investors should remain cautious, particularly if things don't improve.

You should always think about risks. Case in point, we've spotted 1 warning sign for Hecla Mining you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.