What You Can Learn From Hatsun Agro Product Limited's (NSE:HATSUN) P/S

When you see that almost half of the companies in the Food industry in India have price-to-sales ratios (or "P/S") below 1.2x, Hatsun Agro Product Limited (NSE:HATSUN) looks to be giving off some sell signals with its 3x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Hatsun Agro Product

How Has Hatsun Agro Product Performed Recently?

Hatsun Agro Product's revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Hatsun Agro Product will help you uncover what's on the horizon.

How Is Hatsun Agro Product's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Hatsun Agro Product's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 36% in total over the last three years. 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 15% during the coming year according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 12%, which is noticeably less attractive.

With this information, we can see why Hatsun Agro Product is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Hatsun Agro Product's P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into Hatsun Agro Product shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Hatsun Agro Product, and understanding them should be part of your investment process.

If you're unsure about the strength of Hatsun Agro Product's 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.