Investors Continue Waiting On Sidelines For Manugraph India Limited (NSE:MANUGRAPH)

Manugraph India Limited's (NSE:MANUGRAPH) price-to-sales (or "P/S") ratio of 0.8x might make it look like a buy right now compared to the Machinery industry in India, where around half of the companies have P/S ratios above 2.8x and even P/S above 6x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Manugraph India

How Has Manugraph India Performed Recently?

Recent times have been quite advantageous for Manugraph India as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. 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.

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

Is There Any Revenue Growth Forecasted For Manugraph India?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Manugraph India's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 51% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 77% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 13% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's peculiar that Manugraph India's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Manugraph India's P/S

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're very surprised to see Manugraph India currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. 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.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Manugraph India that you need to be mindful of.

If you're unsure about the strength of Manugraph India's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.