Multi Commodity Exchange of India Limited's (NSE:MCX) Earnings Haven't Escaped The Attention Of Investors

Multi Commodity Exchange of India Limited's (NSE:MCX) price-to-sales (or "P/S") ratio of 30.7x might make it look like a strong sell right now compared to the Capital Markets industry in India, where around half of the companies have P/S ratios below 7.2x and even P/S below 3x are quite common. 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 Multi Commodity Exchange of India

What Does Multi Commodity Exchange of India's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Multi Commodity Exchange of India has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Multi Commodity Exchange of India's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Multi Commodity Exchange of India?

In order to justify its P/S ratio, Multi Commodity Exchange of India would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 45%. The strong recent performance means it was also able to grow revenue by 119% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 26% per annum during the coming three years according to the nine analysts following the company. That's shaping up to be materially higher than the 13% per annum growth forecast for the broader industry.

In light of this, it's understandable that Multi Commodity Exchange of 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.

What We Can Learn From Multi Commodity Exchange of India's P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look into Multi Commodity Exchange of 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.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Multi Commodity Exchange of India with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Multi Commodity Exchange of 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.