IFB Industries Limited's (NSE:IFBIND) Price Is Right But Growth Is Lacking After Shares Rocket 33%

IFB Industries Limited (NSE:IFBIND) shares have continued their recent momentum with a 33% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 42% in the last year.

In spite of the firm bounce in price, it would still be understandable if you think IFB Industries is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 1.2x, considering almost half the companies in India's Consumer Durables industry have P/S ratios above 2.1x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for IFB Industries

What Does IFB Industries' Recent Performance Look Like?

IFB Industries could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on IFB Industries.

Do Revenue Forecasts Match The Low P/S Ratio?

IFB Industries' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a decent 3.9% gain to the company's revenues. The latest three year period has also seen an excellent 86% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 11% over the next year. That's shaping up to be materially lower than the 26% growth forecast for the broader industry.

With this in consideration, its clear as to why IFB Industries' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From IFB Industries' P/S?

The latest share price surge wasn't enough to lift IFB Industries' P/S close to the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of IFB Industries' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 1 warning sign for IFB Industries you should know about.

If these risks are making you reconsider your opinion on IFB Industries, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.