Spacenet Enterprises India Limited (NSE:SPCENET) Looks Just Right With A 30% Price Jump

Despite an already strong run, Spacenet Enterprises India Limited (NSE:SPCENET) shares have been powering on, with a gain of 30% in the last thirty days. Looking further back, the 21% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Since its price has surged higher, you could be forgiven for thinking Spacenet Enterprises India is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 14.3x, considering almost half the companies in India's Trade Distributors industry have P/S ratios below 1.7x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Spacenet Enterprises India

What Does Spacenet Enterprises India's Recent Performance Look Like?

Revenue has risen at a steady rate over the last year for Spacenet Enterprises India, which is generally not a bad outcome. It might be that many expect the reasonable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Spacenet Enterprises India's earnings, revenue and cash flow.

How Is Spacenet Enterprises India's Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 2.7% gain to the company's revenues. While this performance is only fair, the company was still able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 3.6%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it's not hard to understand why Spacenet Enterprises India's 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

Shares in Spacenet Enterprises India have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's no surprise that Spacenet Enterprises India 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. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Spacenet Enterprises India (1 is potentially serious!) that you should be aware of before investing here.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.