Why We're Not Concerned Yet About ideaForge Technology Limited's (NSE:IDEAFORGE) 25% Share Price Plunge

ideaForge Technology Limited (NSE:IDEAFORGE) shares have had a horrible month, losing 25% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 34% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about ideaForge Technology's P/S ratio of 8.2x, since the median price-to-sales (or "P/S") ratio for the Aerospace & Defense industry in India is also close to 8.7x. 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 ideaForge Technology

How Has ideaForge Technology Performed Recently?

ideaForge Technology could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on ideaForge Technology will help you uncover what's on the horizon.

How Is ideaForge Technology's Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.9%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 53% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 27% as estimated by the two analysts watching the company. With the industry predicted to deliver 27% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that ideaForge Technology's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On ideaForge Technology's P/S

With its share price dropping off a cliff, the P/S for ideaForge Technology looks to be in line with the rest of the Aerospace & Defense industry. 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.

A ideaForge Technology's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Aerospace & Defense industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 1 warning sign for ideaForge Technology you should be aware of.

If these risks are making you reconsider your opinion on ideaForge Technology, 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.