Market Participants Recognise Anglo Asian Mining PLC’s (LON:AAZ) Revenues Pushing Shares 27% Higher

The Anglo Asian Mining PLC (LON:AAZ) share price has done very well over the last month, posting an excellent gain of 27%. The annual gain comes to 133% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, when almost half of the companies in the United Kingdom’s Metals and Mining industry have price-to-sales ratios (or “P/S”) below 2.3x, you may consider Anglo Asian Mining as a stock not worth researching with its 7.9x P/S ratio. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Anglo Asian Mining

What Does Anglo Asian Mining’s P/S Mean For Shareholders?

Anglo Asian Mining hasn’t been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting the poor revenue to reverse, justifying it’s current high P/S.. However, if this isn’t the case, investors might get caught out paying too much for the stock.

If you’d like to see what analysts are forecasting going forward, you should check out our free report on Anglo Asian Mining.

Is There Enough Revenue Growth Forecasted For Anglo Asian Mining?

The only time you’d be truly comfortable seeing a P/S as steep as Anglo Asian Mining’s is when the company’s growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a frustrating 14% decrease to the company’s top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 57% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 214% over the next year. That’s shaping up to be materially higher than the 31% growth forecast for the broader industry.

With this in mind, it’s not hard to understand why Anglo Asian 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.

What We Can Learn From Anglo Asian Mining’s P/S?

Anglo Asian Mining’s P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 into Anglo Asian 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 the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 2 warning signs we’ve spotted with Anglo Asian Mining (including 1 which doesn’t sit too well with us).

If these risks are making you reconsider your opinion on Anglo Asian 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.