Market Participants Recognise Adani Wilmar Limited's (NSE:AWL) Revenues

With a median price-to-sales (or "P/S") ratio of close to 1.1x in the Food industry in India, you could be forgiven for feeling indifferent about Adani Wilmar Limited's (NSE:AWL) P/S ratio of 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Adani Wilmar

How Adani Wilmar Has Been Performing

Adani Wilmar could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is Adani Wilmar's Revenue Growth Trending?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Fortunately, a few good years before that means that it was still able to grow revenue by 19% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 13% over the next year. With the industry predicted to deliver 12% growth , the company is positioned for a comparable revenue result.

With this information, we can see why Adani Wilmar is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Adani Wilmar'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.

A Adani Wilmar's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Food industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Adani Wilmar with six simple checks.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.