Market Might Still Lack Some Conviction On The New India Assurance Company Limited (NSE:NIACL) Even After 48% Share Price Boost

The New India Assurance Company Limited (NSE:NIACL) shareholders have had their patience rewarded with a 48% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 83%.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about New India Assurance's P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Insurance industry in India is also close to 1.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for New India Assurance

What Does New India Assurance's Recent Performance Look Like?

New India Assurance could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. 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 New India Assurance's future stacks up against the industry? In that case, our free report is a great place to start.

How Is New India Assurance's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 8.0% last year. Pleasingly, revenue has also lifted 34% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 6.7% during the coming year according to the one analyst following the company. With the industry only predicted to deliver 4.3%, the company is positioned for a stronger revenue result.

In light of this, it's curious that New India Assurance's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On New India Assurance's P/S

New India Assurance 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.

We've established that New India Assurance currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for New India Assurance you should be aware of, and 2 of them are a bit concerning.

If you're unsure about the strength of New India Assurance'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.