Prataap Snacks Limited's (NSE:DIAMONDYD) P/S Is Still On The Mark Following 26% Share Price Bounce

Prataap Snacks Limited (NSE:DIAMONDYD) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking further back, the 17% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, there still wouldn't be many who think Prataap Snacks' price-to-sales (or "P/S") ratio of 1.5x is worth a mention when the median P/S in India's Food industry is similar at about 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Prataap Snacks

How Has Prataap Snacks Performed Recently?

Prataap Snacks 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Prataap Snacks.

Is There Some Revenue Growth Forecasted For Prataap Snacks?

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

Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. Pleasingly, revenue has also lifted 37% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 12% during the coming year according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 12%, which is not materially different.

In light of this, it's understandable that Prataap Snacks' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Prataap Snacks' P/S Mean For Investors?

Prataap Snacks appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

A Prataap Snacks' 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.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Prataap Snacks that you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.