Not Many Are Piling Into KEC International Limited (NSE:KEC) Just Yet

With a price-to-sales (or "P/S") ratio of 0.9x KEC International Limited (NSE:KEC) may be sending bullish signals at the moment, given that almost half of all the Construction companies in India have P/S ratios greater than 1.9x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for KEC International

How KEC International Has Been Performing

With revenue growth that's superior to most other companies of late, KEC International has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For KEC International?

KEC International's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 24%. The strong recent performance means it was also able to grow revenue by 53% 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 three years should generate growth of 9.2% per annum as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.4% per annum, which is not materially different.

In light of this, it's peculiar that KEC International's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of KEC International's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for KEC International you should be aware of, and 1 of them shouldn't be ignored.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.