Why We're Not Concerned Yet About Sejal Glass Limited's (NSE:SEJALLTD) 27% Share Price Plunge

The Sejal Glass Limited (NSE:SEJALLTD) share price has fared very poorly over the last month, falling by a substantial 27%. Still, a bad month hasn't completely ruined the past year with the stock gaining 51%, which is great even in a bull market.

Even after such a large drop in price, given close to half the companies operating in India's Building industry have price-to-sales ratios (or "P/S") below 1.5x, you may still consider Sejal Glass as a stock to potentially avoid with its 2.2x 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.

Check out our latest analysis for Sejal Glass

How Sejal Glass Has Been Performing

Recent times have been quite advantageous for Sejal Glass as its revenue has been rising very briskly. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. 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?

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

Retrospectively, the last year delivered an exceptional 133% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 18% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why Sejal Glass' 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 Bottom Line On Sejal Glass' P/S

There's still some elevation in Sejal Glass' P/S, even if the same can't be said for its share price recently. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

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.

It is also worth noting that we have found 3 warning signs for Sejal Glass (1 shouldn't be ignored!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Sejal Glass, 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.