Take Care Before Diving Into The Deep End On Dixon Technologies (India) Limited (NSE:DIXON)

With a median price-to-sales (or "P/S") ratio of close to 1.9x in the Consumer Durables industry in India, you could be forgiven for feeling indifferent about Dixon Technologies (India) Limited's (NSE:DIXON) P/S ratio of 2.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for Dixon Technologies (India)

How Has Dixon Technologies (India) Performed Recently?

Recent times have been advantageous for Dixon Technologies (India) as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Dixon Technologies (India)'s future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Dixon Technologies (India)?

Dixon Technologies (India)'s P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 115% last year. The strong recent performance means it was also able to grow revenue by 286% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 29% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 24% each year, which is noticeably less attractive.

With this information, we find it interesting that Dixon Technologies (India) is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

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.

Looking at Dixon Technologies (India)'s analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for Dixon Technologies (India) you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.