Investors Appear Satisfied With GE T&D India Limited's (NSE:GET&D) Prospects As Shares Rocket 26%

GE T&D India Limited (NSE:GET&D) shares have continued their recent momentum with a 26% gain in the last month alone. This latest share price bounce rounds out a remarkable 531% gain over the last twelve months.

Following the firm bounce in price, you could be forgiven for thinking GE T&D India is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 10.7x, considering almost half the companies in India's Electrical industry have P/S ratios below 3.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for GE T&D India

What Does GE T&D India's Recent Performance Look Like?

GE T&D India could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think GE T&D India's future stacks up against the industry? In that case, our free report is a great place to start.

How Is GE T&D India's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like GE T&D India's to be considered reasonable.

Retrospectively, the last year delivered a decent 14% gain to the company's revenues. Still, lamentably revenue has fallen 8.2% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 36% per annum during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 22% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why GE T&D India's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On GE T&D India's P/S

GE T&D India's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 GE T&D India's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for GE T&D India with six simple checks on some of these key factors.

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.