Impala Platinum Holdings Limited's (JSE:IMP) 47% Jump Shows Its Popularity With Investors

Impala Platinum Holdings Limited (JSE:IMP) shares have had a really impressive month, gaining 47% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 12% is also fairly reasonable.

Even after such a large jump in price, there still wouldn't be many who think Impala Platinum Holdings' price-to-sales (or "P/S") ratio of 1.1x is worth a mention when it essentially matches the median P/S in South Africa'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.

See our latest analysis for Impala Platinum Holdings

What Does Impala Platinum Holdings' Recent Performance Look Like?

Recent times haven't been great for Impala Platinum Holdings as its revenue has been falling quicker than most other companies. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Impala Platinum Holdings will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Impala Platinum Holdings?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Impala Platinum Holdings' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 19%. This means it has also seen a slide in revenue over the longer-term as revenue is down 33% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 7.6% each year during the coming three years according to the seven analysts following the company. That's shaping up to be similar to the 9.2% per year growth forecast for the broader industry.

With this in mind, it makes sense that Impala Platinum Holdings' P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

Impala Platinum Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 at Impala Platinum Holdings' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Impala Platinum Holdings that you should be aware of.

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.