It's Down 32% But AXISCADES Technologies Limited (NSE:AXISCADES) Could Be Riskier Than It Looks

AXISCADES Technologies Limited (NSE:AXISCADES) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month. Longer-term, the stock has been solid despite a difficult 30 days, gaining 12% in the last year.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about AXISCADES Technologies' P/S ratio of 2x, since the median price-to-sales (or "P/S") ratio for the Construction industry in India is about the same. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for AXISCADES Technologies

How Has AXISCADES Technologies Performed Recently?

Revenue has risen firmly for AXISCADES Technologies recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for AXISCADES Technologies, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 17%. The strong recent performance means it was also able to grow revenue by 82% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 14% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that AXISCADES Technologies is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On AXISCADES Technologies' P/S

With its share price dropping off a cliff, the P/S for AXISCADES Technologies looks to be in line with the rest of the Construction industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that AXISCADES Technologies currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 2 warning signs for AXISCADES Technologies that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.