Despite an already strong run, Mongolian Mining Corporation (HKG:975) shares have been powering on, with a gain of 73% in the last thirty days. The last month tops off a massive increase of 272% in the last year.
Since its price has surged higher, when almost half of the companies in Hong Kong's Metals and Mining industry have price-to-sales ratios (or "P/S") below 0.4x, you may consider Mongolian Mining as a stock probably not worth researching with its 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 as high as it is.
See our latest analysis for Mongolian Mining
SEHK:975 Price to Sales Ratio vs Industry December 25th 2023
How Mongolian Mining Has Been Performing
With revenue growth that's exceedingly strong of late, Mongolian Mining has been doing very well. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors' willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Mongolian Mining's earnings, revenue and cash flow.
What Are Revenue Growth Metrics Telling Us About The High P/S?
The only time you'd be truly comfortable seeing a P/S as high as Mongolian Mining's is when the company's growth is on track to outshine the industry.
Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. The latest three year period has also seen an excellent 109% overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
When compared to the industry's one-year growth forecast of 10%, the most recent medium-term revenue trajectory is noticeably more alluring
In light of this, it's understandable that Mongolian Mining's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.
What We Can Learn From Mongolian Mining's P/S?
The large bounce in Mongolian Mining's shares has lifted the company's P/S handsomely. 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 Mongolian Mining revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Mongolian Mining that you need to be mindful of.
If these risks are making you reconsider your opinion on Mongolian 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.