Coeur Mining, Inc.'s (NYSE:CDE) Shares Climb 26% But Its Business Is Yet to Catch Up
Those holding Coeur Mining, Inc. (NYSE:CDE) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The annual gain comes to 199% following the latest surge, making investors sit up and take notice.
After such a large jump in price, given around half the companies in the United States' Metals and Mining industry have price-to-sales ratios (or "P/S") below 2.5x, you may consider Coeur Mining as a stock to avoid entirely with its 7.3x 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.
View our latest analysis for Coeur Mining
How Has Coeur Mining Performed Recently?
Recent times have been advantageous for Coeur Mining as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Coeur Mining.How Is Coeur Mining's Revenue Growth Trending?
Coeur Mining's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.
Retrospectively, the last year delivered an exceptional 68% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 117% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Turning to the outlook, the next three years should generate growth of 14% per annum as estimated by the four analysts watching the company. That's shaping up to be similar to the 14% per year growth forecast for the broader industry.
With this information, we find it interesting that Coeur Mining is trading at a high P/S compared to the industry. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.
The Key Takeaway
The strong share price surge has lead to Coeur Mining's P/S soaring as well. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Analysts are forecasting Coeur Mining's revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. Unless the company can jump ahead of the rest of the industry in the short-term, it'll be a challenge to maintain the share price at current levels.
There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Coeur Mining that you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.