Coeur Mining, Inc. (NYSE:CDE) shares have had a really impressive month, gaining 29% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 46%.
Since its price has surged higher, given around half the companies in the United States' Metals and Mining industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider Coeur Mining as a stock to avoid entirely with its 4.1x 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 so lofty.
We've discovered 2 warning signs about Coeur Mining. View them for free.
What Does Coeur Mining's Recent Performance Look Like?
With revenue growth that's superior to most other companies of late, Coeur Mining has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.
Keen to find out how analysts think Coeur Mining'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 Coeur Mining?
There's an inherent assumption that a company should far outperform the industry for P/S ratios like Coeur Mining's to be considered reasonable.
Retrospectively, the last year delivered an exceptional 42% gain to the company's top line. Pleasingly, revenue has also lifted 47% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 17% per annum over the next three years. That's shaping up to be materially higher than the 5.4% per annum growth forecast for the broader industry.
With this in mind, it's not hard to understand why Coeur Mining's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Final Word
Shares in Coeur Mining have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.
As we suspected, our examination of Coeur Mining's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
It is also worth noting that we have found 2 warning signs for Coeur Mining (1 makes us a bit uncomfortable!) that you need to take into consideration.
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.
