Even With A 27% Surge, Cautious Investors Are Not Rewarding Kriti Industries (India) Limited's (NSE:KRITI) Performance Completely

Kriti Industries (India) Limited (NSE:KRITI) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking further back, the 19% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, it would still be understandable if you think Kriti Industries (India) is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.9x, considering almost half the companies in India's Building industry have P/S ratios above 1.5x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

We've discovered 5 warning signs about Kriti Industries (India). View them for free.

See our latest analysis for Kriti Industries (India)

How Has Kriti Industries (India) Performed Recently?

For example, consider that Kriti Industries (India)'s financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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.

Although there are no analyst estimates available for Kriti Industries (India), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Kriti Industries (India)'s Revenue Growth Trending?

Kriti Industries (India)'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.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.5%. Still, the latest three year period has seen an excellent 53% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

This is in contrast to the rest of the industry, which is expected to grow by 13% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Kriti Industries (India)'s P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

Despite Kriti Industries (India)'s share price climbing recently, its P/S still lags most other companies. 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.

We're very surprised to see Kriti Industries (India) currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Kriti Industries (India) (at least 2 which are potentially serious), and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on Kriti Industries (India), 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.