MTAR Technologies Limited (NSE:MTARTECH) Stocks Shoot Up 27% But Its P/S Still Looks Reasonable

Despite an already strong run, MTAR Technologies Limited (NSE:MTARTECH) shares have been powering on, with a gain of 27% in the last thirty days. Looking further back, the 18% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, when almost half of the companies in India's Machinery industry have price-to-sales ratios (or "P/S") below 2.9x, you may consider MTAR Technologies as a stock not worth researching with its 9.3x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for MTAR Technologies

What Does MTAR Technologies' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, MTAR Technologies has been doing relatively well. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MTAR Technologies.

How Is MTAR Technologies' Revenue Growth Trending?

MTAR Technologies' 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.

Taking a look back first, we see that the company grew revenue by an impressive 27% last year. The latest three year period has also seen an excellent 96% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 33% during the coming year according to the three analysts following the company. With the industry only predicted to deliver 13%, the company is positioned for a stronger revenue result.

With this information, we can see why MTAR Technologies is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

MTAR Technologies' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of MTAR Technologies' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with MTAR Technologies.

If these risks are making you reconsider your opinion on MTAR Technologies, 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.