Hitachi Energy India Limited (NSE:POWERINDIA) Not Lagging Industry On Growth Or Pricing

Hitachi Energy India Limited's (NSE:POWERINDIA) price-to-sales (or "P/S") ratio of 13.1x may look like a poor investment opportunity when you consider close to half the companies in the Electrical industry in India have P/S ratios below 2.6x. 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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View our latest analysis for Hitachi Energy India

How Hitachi Energy India Has Been Performing

Recent times haven't been great for Hitachi Energy India as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Hitachi Energy India?

The only time you'd be truly comfortable seeing a P/S as steep as Hitachi Energy India's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. Pleasingly, revenue has also lifted 61% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 45% as estimated by the twelve analysts watching the company. With the industry only predicted to deliver 25%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Hitachi Energy India's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Hitachi Energy India's P/S Mean For Investors?

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.

We've established that Hitachi Energy India maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electrical industry, as expected. 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.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Hitachi Energy India with six simple checks on some of these key factors.

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.