Revenues Tell The Story For Nupur Recyclers Limited (NSE:NRL) As Its Stock Soars 26%

Nupur Recyclers Limited (NSE:NRL) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Looking further back, the 23% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

After such a large jump in price, you could be forgiven for thinking Nupur Recyclers is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.7x, considering almost half the companies in India's Trade Distributors industry have P/S ratios below 1.8x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Nupur Recyclers

What Does Nupur Recyclers' Recent Performance Look Like?

Nupur Recyclers has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Nupur Recyclers' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Nupur Recyclers' is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 28% gain to the company's top line. Pleasingly, revenue has also lifted 131% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 7.1% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why Nupur Recyclers' P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Final Word

Nupur Recyclers' P/S is on the rise since its shares have risen strongly. 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.

It's no surprise that Nupur Recyclers can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Before you settle on your opinion, we've discovered 4 warning signs for Nupur Recyclers (2 are significant!) that you should be aware of.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.