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April 18, 2024
PI Global Investments

Why Investors Shouldn’t Be Surprised By Avino Silver & Gold Mines Ltd.’s (TSE:ASM) P/E

When close to half the companies in Canada have price-to-earnings ratios (or “P/E’s”) below 12x, you may consider Avino Silver & Gold Mines Ltd. (TSE:ASM) as a stock to avoid entirely with its 45.7x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it’s justified.

With earnings that are retreating more than the market’s of late, Avino Silver & Gold Mines has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for Avino Silver & Gold Mines

TSX:ASM Price to Earnings Ratio vs Industry January 22nd 2024

Keen to find out how analysts think Avino Silver & Gold Mines’ future stacks up against the industry? In that case, our free report is a great place to start.

What Are Growth Metrics Telling Us About The High P/E?

The only time you’d be truly comfortable seeing a P/E as steep as Avino Silver & Gold Mines’ is when the company’s growth is on track to outshine the market decidedly.

Taking a look back first, the company’s earnings per share growth last year wasn’t something to get excited about as it posted a disappointing decline of 73%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Therefore, it’s fair to say that earnings growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 490% as estimated by the four analysts watching the company. With the market only predicted to deliver 12%, the company is positioned for a stronger earnings result.

With this information, we can see why Avino Silver & Gold Mines is trading at such a high P/E compared to the market. Apparently shareholders aren’t keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Typically, we’d caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We’ve established that Avino Silver & Gold Mines maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren’t under threat. It’s hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example – Avino Silver & Gold Mines has 4 warning signs we think you should be aware of.

Of course, you might also be able to find a better stock than Avino Silver & Gold Mines. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Valuation is complex, but we’re helping make it simple.

Find out whether Avino Silver & Gold Mines is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.

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