Market Cool On Apollo Micro Systems Limited's (NSE:APOLLO) Revenues Pushing Shares 26% Lower

Apollo Micro Systems Limited (NSE:APOLLO) shares have had a horrible month, losing 26% after a relatively good period beforehand. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 293% in the last twelve months.

Although its price has dipped substantially, there still wouldn't be many who think Apollo Micro Systems' price-to-sales (or "P/S") ratio of 8.1x is worth a mention when the median P/S in India's Aerospace & Defense industry is similar at about 7.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Apollo Micro Systems

What Does Apollo Micro Systems' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Apollo Micro Systems has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Apollo Micro Systems' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Apollo Micro Systems would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 16% last year. The latest three year period has also seen an excellent 73% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 72% over the next year. That's shaping up to be materially higher than the 25% growth forecast for the broader industry.

In light of this, it's curious that Apollo Micro Systems' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Following Apollo Micro Systems' share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Despite enticing revenue growth figures that outpace the industry, Apollo Micro Systems' P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Apollo Micro Systems that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.