Investors Appear Satisfied With Sejal Glass Limited's (NSE:SEJALLTD) Prospects As Shares Rocket 30%

Despite an already strong run, Sejal Glass Limited (NSE:SEJALLTD) shares have been powering on, with a gain of 30% in the last thirty days. The last 30 days bring the annual gain to a very sharp 46%.

Following the firm bounce in price, given close to half the companies operating in India's Building industry have price-to-sales ratios (or "P/S") below 1.4x, you may consider Sejal Glass as a stock to potentially avoid with its 3.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for Sejal Glass

What Does Sejal Glass' P/S Mean For Shareholders?

Recent times have been quite advantageous for Sejal Glass as its revenue has been rising very briskly. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. 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 Sejal Glass will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Sejal Glass?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Sejal Glass' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 194%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 19% 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 understandable that Sejal Glass' P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Key Takeaway

The large bounce in Sejal Glass' shares has lifted the company's P/S handsomely. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's no surprise that Sejal Glass 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. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Before you take the next step, you should know about the 3 warning signs for Sejal Glass (1 can't be ignored!) that we have uncovered.

If you're unsure about the strength of Sejal Glass' 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.