Revenues Tell The Story For Inox Wind Limited (NSE:INOXWIND) As Its Stock Soars 28%

The Inox Wind Limited (NSE:INOXWIND) share price has done very well over the last month, posting an excellent gain of 28%. The last 30 days were the cherry on top of the stock's 471% gain in the last year, which is nothing short of spectacular.

Since its price has surged higher, given around half the companies in India's Electrical industry have price-to-sales ratios (or "P/S") below 3.2x, you may consider Inox Wind as a stock to avoid entirely with its 13.2x P/S ratio. 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.

Check out our latest analysis for Inox Wind

What Does Inox Wind's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Inox Wind has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Inox Wind's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 107% last year. Pleasingly, revenue has also lifted 113% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 183% as estimated by the three analysts watching the company. With the industry only predicted to deliver 30%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Inox Wind'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.

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. 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 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. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Inox Wind with six simple checks will allow you to discover any risks that could be an issue.

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.