Getting In Cheap On Jyoti CNC Automation Limited (NSE:JYOTICNC) Might Be Difficult

Jyoti CNC Automation Limited's (NSE:JYOTICNC) price-to-sales (or "P/S") ratio of 15.4x may look like a poor investment opportunity when you consider close to half the companies in the Machinery industry in India have P/S ratios below 2.6x. 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.

View our latest analysis for Jyoti CNC Automation

How Jyoti CNC Automation Has Been Performing

Recent times have been advantageous for Jyoti CNC Automation 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 Jyoti CNC Automation will help you uncover what's on the horizon.

How Is Jyoti CNC Automation's Revenue Growth Trending?

Jyoti CNC Automation'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.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 127% in total over the last three years. 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 64% as estimated by the lone analyst watching the company. That's shaping up to be materially higher than the 18% growth forecast for the broader industry.

In light of this, it's understandable that Jyoti CNC Automation's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Jyoti CNC Automation's P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Jyoti CNC Automation maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Machinery industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

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

If these risks are making you reconsider your opinion on Jyoti CNC Automation, 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.