After Leaping 26% Sterling and Wilson Renewable Energy Limited (NSE:SWSOLAR) Shares Are Not Flying Under The Radar

Despite an already strong run, Sterling and Wilson Renewable Energy Limited (NSE:SWSOLAR) shares have been powering on, with a gain of 26% in the last thirty days. The last 30 days bring the annual gain to a very sharp 91%.

Following the firm bounce in price, when almost half of the companies in India's Construction industry have price-to-sales ratios (or "P/S") below 2.2x, you may consider Sterling and Wilson Renewable Energy as a stock not worth researching with its 7x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Sterling and Wilson Renewable Energy

What Does Sterling and Wilson Renewable Energy's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Sterling and Wilson Renewable Energy's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Sterling and Wilson Renewable Energy will help you uncover what's on the horizon.

How Is Sterling and Wilson Renewable Energy's Revenue Growth Trending?

Sterling and Wilson Renewable Energy's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a frustrating 35% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 66% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 399% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 12%, which is noticeably less attractive.

With this information, we can see why Sterling and Wilson Renewable Energy is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Sterling and Wilson Renewable Energy's P/S

Sterling and Wilson Renewable Energy's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Our look into Sterling and Wilson Renewable Energy shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 2 warning signs for Sterling and Wilson Renewable Energy you should be aware of, and 1 of them is concerning.

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.