Dilip Buildcon Limited's (NSE:DBL) Price Is Right But Growth Is Lacking

You may think that with a price-to-sales (or "P/S") ratio of 0.5x Dilip Buildcon Limited (NSE:DBL) is a stock worth checking out, seeing as almost half of all the Construction companies in India have P/S ratios greater than 1.7x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Dilip Buildcon

What Does Dilip Buildcon's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Dilip Buildcon has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Dilip Buildcon's Revenue Growth Trending?

Dilip Buildcon's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.2% last year. The solid recent performance means it was also able to grow revenue by 14% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 2.0% during the coming year according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 11%, which is noticeably more attractive.

With this in consideration, its clear as to why Dilip Buildcon's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Dilip Buildcon's P/S Mean For Investors?

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.

As expected, our analysis of Dilip Buildcon's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for Dilip Buildcon (1 makes us a bit uncomfortable!) that we have uncovered.

If these risks are making you reconsider your opinion on Dilip Buildcon, 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.