Subdued Growth No Barrier To Le Travenues Technology Limited (NSE:IXIGO) With Shares Advancing 26%

Le Travenues Technology Limited (NSE:IXIGO) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 27% in the last year.

After such a large jump in price, Le Travenues Technology's price-to-sales (or "P/S") ratio of 8x might make it look like a strong sell right now compared to other companies in the Hospitality industry in India, where around half of the companies have P/S ratios below 4.8x and even P/S below 2x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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Check out our latest analysis for Le Travenues Technology

What Does Le Travenues Technology's P/S Mean For Shareholders?

Recent times have been advantageous for Le Travenues Technology 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.

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Is There Enough Revenue Growth Forecasted For Le Travenues Technology?

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

Retrospectively, the last year delivered an exceptional 56% gain to the company's top line. The latest three year period has also seen an excellent 141% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 31% during the coming year according to the three analysts following the company. That's shaping up to be similar to the 31% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Le Travenues Technology's P/S is higher than its industry peers. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

The Bottom Line On Le Travenues Technology's P/S

The strong share price surge has lead to Le Travenues Technology's P/S soaring as well. 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.

Seeing as its revenues are forecast to grow in line with the wider industry, it would appear that Le Travenues Technology currently trades on a higher than expected P/S. When we see revenue growth that just matches the industry, we don't expect elevates P/S figures to remain inflated for the long-term. Unless the company can jump ahead of the rest of the industry in the short-term, it'll be a challenge to maintain the share price at current levels.

Plus, you should also learn about these 2 warning signs we've spotted with Le Travenues Technology.

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.