Kalyan Jewellers India Limited (NSE:KALYANKJIL) Not Lagging Industry On Growth Or Pricing

When you see that almost half of the companies in the Luxury industry in India have price-to-sales ratios (or "P/S") below 1.1x, Kalyan Jewellers India Limited (NSE:KALYANKJIL) looks to be giving off strong sell signals with its 3.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Kalyan Jewellers India

What Does Kalyan Jewellers India's P/S Mean For Shareholders?

Recent times have been advantageous for Kalyan Jewellers India as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as Kalyan Jewellers India's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 33% gain to the company's top line. Pleasingly, revenue has also lifted 103% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 33% over the next year. That's shaping up to be materially higher than the 23% growth forecast for the broader industry.

In light of this, it's understandable that Kalyan Jewellers India's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

Our look into Kalyan Jewellers India 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. It's hard to see the share price falling strongly in the near future under these circumstances.

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

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

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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.