Why We're Not Concerned Yet About Akshar Spintex Limited's (NSE:AKSHAR) 29% Share Price Plunge

Akshar Spintex Limited (NSE:AKSHAR) shares have had a horrible month, losing 29% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 20% share price drop.

In spite of the heavy fall in price, there still wouldn't be many who think Akshar Spintex's price-to-sales (or "P/S") ratio of 0.8x is worth a mention when it essentially matches the median P/S in India's Luxury industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Akshar Spintex

What Does Akshar Spintex's Recent Performance Look Like?

For instance, Akshar Spintex's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Akshar Spintex will help you shine a light on its historical performance.

How Is Akshar Spintex's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Akshar Spintex's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 6.5% decrease to the company's top line. Still, the latest three year period has seen an excellent 44% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

It's interesting to note that the rest of the industry is similarly expected to grow by 13% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Akshar Spintex's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Final Word

Akshar Spintex's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we've seen, Akshar Spintex's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Akshar Spintex (1 is concerning!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.