Investors Give Dwarikesh Sugar Industries Limited (NSE:DWARKESH) Shares A 25% Hiding

To the annoyance of some shareholders, Dwarikesh Sugar Industries Limited (NSE:DWARKESH) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 51% loss during that time.

Although its price has dipped substantially, there still wouldn't be many who think Dwarikesh Sugar Industries' price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in India's Food industry is similar at about 0.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Dwarikesh Sugar Industries

What Does Dwarikesh Sugar Industries' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Dwarikesh Sugar Industries' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. 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 Dwarikesh Sugar Industries' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Dwarikesh Sugar Industries' is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 31%. As a result, revenue from three years ago have also fallen 39% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 31% during the coming year according to the dual analysts following the company. That's shaping up to be materially higher than the 12% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Dwarikesh Sugar Industries' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Dwarikesh Sugar Industries' P/S?

With its share price dropping off a cliff, the P/S for Dwarikesh Sugar Industries looks to be in line with the rest of the Food industry. 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.

Looking at Dwarikesh Sugar Industries' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Dwarikesh Sugar Industries you should know about.

If you're unsure about the strength of Dwarikesh Sugar Industries' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.