Lagnam Spintex Limited (NSE:LAGNAM) Stock Rockets 26% But Many Are Still Ignoring The Company

Despite an already strong run, Lagnam Spintex Limited (NSE:LAGNAM) shares have been powering on, with a gain of 26% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 89% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Lagnam Spintex's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Luxury industry in India is also close to 0.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Lagnam Spintex

What Does Lagnam Spintex's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Lagnam Spintex over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Lagnam Spintex's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Lagnam Spintex?

In order to justify its P/S ratio, Lagnam Spintex would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 2.3% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 89% in total over the last three years. 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 13% shows it's noticeably more attractive.

In light of this, it's curious that Lagnam Spintex's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Lagnam Spintex's P/S?

Its shares have lifted substantially and now Lagnam Spintex's P/S is back within range of 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.

We've established that Lagnam Spintex currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 5 warning signs for Lagnam Spintex (3 can't be ignored!) that you should be aware of.

If these risks are making you reconsider your opinion on Lagnam Spintex, 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.