Investors Appear Satisfied With McEwen Mining Inc.'s (NYSE:MUX) Prospects

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, McEwen Mining Inc. (NYSE:MUX) looks to be giving off some sell signals with its 2.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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Check out our latest analysis for McEwen Mining

How Has McEwen Mining Performed Recently?

With revenue growth that's inferior to most other companies of late, McEwen Mining has been relatively sluggish. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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How Is McEwen Mining's Revenue Growth Trending?

McEwen 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.

Retrospectively, the last year delivered a decent 5.0% gain to the company's revenues. Revenue has also lifted 28% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 28% over the next year. That's shaping up to be materially higher than the 12% growth forecast for the broader industry.

With this in mind, it's not hard to understand why McEwen Mining'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 McEwen Mining's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into McEwen Mining shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with McEwen Mining .

If these risks are making you reconsider your opinion on McEwen Mining, 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.