Revenues Not Telling The Story For Kriti Industries (India) Limited (NSE:KRITI) After Shares Rise 27%

Despite an already strong run, Kriti Industries (India) Limited (NSE:KRITI) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 130% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, it's still not a stretch to say that Kriti Industries (India)'s price-to-sales (or "P/S") ratio of 1.4x right now seems quite "middle-of-the-road" compared to the Building industry in India, where the median P/S ratio is around 1.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Kriti Industries (India)

How Kriti Industries (India) Has Been Performing

For example, consider that Kriti Industries (India)'s financial performance has been pretty ordinary lately as revenue growth is non-existent. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. 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 not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Kriti Industries (India) will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Kriti Industries (India)?

In order to justify its P/S ratio, Kriti Industries (India) would need to produce growth that's similar to the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Although pleasingly revenue has lifted 44% in aggregate from three years ago, notwithstanding the last 12 months. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

This is in contrast to the rest of the industry, which is expected to grow by 18% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Kriti Industries (India)'s P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Key Takeaway

Kriti Industries (India) appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Kriti Industries (India) revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

It is also worth noting that we have found 3 warning signs for Kriti Industries (India) (2 are potentially serious!) that you need to take into consideration.

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.