A Piece Of The Puzzle Missing From R.P.P. Infra Projects Limited's (NSE:RPPINFRA) 26% Share Price Climb

R.P.P. Infra Projects Limited (NSE:RPPINFRA) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 186% in the last year.

Even after such a large jump in price, R.P.P. Infra Projects may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Construction industry in India have P/S ratios greater than 1.7x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for R.P.P. Infra Projects

How Has R.P.P. Infra Projects Performed Recently?

R.P.P. Infra Projects has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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 R.P.P. Infra Projects will help you shine a light on its historical performance.

How Is R.P.P. Infra Projects' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as R.P.P. Infra Projects' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. Pleasingly, revenue has also lifted 128% 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.

This is in contrast to the rest of the industry, which is expected to grow by 11% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that R.P.P. Infra Projects' P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From R.P.P. Infra Projects' P/S?

The latest share price surge wasn't enough to lift R.P.P. Infra Projects' P/S close to the industry median. 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.

We're very surprised to see R.P.P. Infra Projects currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. 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.

You should always think about risks. Case in point, we've spotted 2 warning signs for R.P.P. Infra Projects you should be aware of.

If these risks are making you reconsider your opinion on R.P.P. Infra Projects, 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.