Himatsingka Seide Limited's (NSE:HIMATSEIDE) P/S Still Appears To Be Reasonable

There wouldn't be many who think Himatsingka Seide Limited's (NSE:HIMATSEIDE) price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S for the Luxury industry in India is similar at about 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Himatsingka Seide

How Himatsingka Seide Has Been Performing

Himatsingka Seide could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Himatsingka Seide will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Himatsingka Seide?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Himatsingka Seide's to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Although pleasingly revenue has lifted 49% in aggregate from three years ago, notwithstanding the last 12 months. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 11% over the next year. That's shaping up to be similar to the 13% growth forecast for the broader industry.

With this information, we can see why Himatsingka Seide is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Himatsingka Seide's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A Himatsingka Seide's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Luxury industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Himatsingka Seide that you should be aware of.

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.