Galiano Gold Inc.'s (TSE:GAU) Shares Leap 26% Yet They're Still Not Telling The Full Story
Galiano Gold Inc. (TSE:GAU) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.
Even after such a large jump in price, Galiano Gold's price-to-sales (or "P/S") ratio of 1.9x might still make it look like a strong buy right now compared to the wider Metals and Mining industry in Canada, where around half of the companies have P/S ratios above 7.1x and even P/S above 44x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
View our latest analysis for Galiano Gold
What Does Galiano Gold's P/S Mean For Shareholders?
Recent times have been advantageous for Galiano Gold as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Galiano Gold.What Are Revenue Growth Metrics Telling Us About The Low P/S?
In order to justify its P/S ratio, Galiano Gold would need to produce anemic growth that's substantially trailing the industry.
Taking a look back first, we see that the company grew revenue by an impressive 111% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.
Turning to the outlook, the next three years should generate growth of 26% each year as estimated by the three analysts watching the company. With the industry predicted to deliver 25% growth each year, the company is positioned for a comparable revenue result.
With this information, we find it odd that Galiano Gold is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.
What Does Galiano Gold's P/S Mean For Investors?
Galiano Gold's recent share price jump still sees fails to bring its P/S alongside the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
It looks to us like the P/S figures for Galiano Gold remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.
Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Galiano Gold with six simple checks will allow you to discover any risks that could be an issue.
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.