Revenues Tell The Story For Hardwyn India Limited (NSE:HARDWYN)

When close to half the companies in the Trade Distributors industry in India have price-to-sales ratios (or "P/S") below 2x, you may consider Hardwyn India Limited (NSE:HARDWYN) as a stock to avoid entirely with its 9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Hardwyn India

How Hardwyn India Has Been Performing

With revenue growth that's exceedingly strong of late, Hardwyn India has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Hardwyn India will help you shine a light on its historical performance.

How Is Hardwyn India's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Hardwyn India's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 45% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.2% shows it's noticeably more attractive.

With this information, we can see why Hardwyn India is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does Hardwyn India's P/S Mean For Investors?

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.

It's no surprise that Hardwyn India can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

You always need to take note of risks, for example - Hardwyn India has 1 warning sign we think you should be aware of.

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.