Market Participants Recognise Inox Wind Limited's (NSE:INOXWIND) Revenues Pushing Shares 62% Higher

Despite an already strong run, Inox Wind Limited (NSE:INOXWIND) shares have been powering on, with a gain of 62% in the last thirty days. The annual gain comes to 263% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, when almost half of the companies in India's Electrical industry have price-to-sales ratios (or "P/S") below 2.6x, you may consider Inox Wind as a stock not worth researching with its 11.7x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Inox Wind

What Does Inox Wind's P/S Mean For Shareholders?

Recent times have been advantageous for Inox Wind as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

Inox Wind's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 87% last year. The strong recent performance means it was also able to grow revenue by 80% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 194% during the coming year according to the dual analysts following the company. That's shaping up to be materially higher than the 28% growth forecast for the broader industry.

In light of this, it's understandable that Inox Wind's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Inox Wind's P/S?

The strong share price surge has lead to Inox Wind's P/S soaring as well. 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 we suspected, our examination of Inox Wind'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.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Inox Wind that you need to be mindful 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.