Anupam Rasayan India Ltd (NSE:ANURAS) Investors Are Less Pessimistic Than Expected

When you see that almost half of the companies in the Chemicals industry in India have price-to-sales ratios (or "P/S") below 1.4x, Anupam Rasayan India Ltd (NSE:ANURAS) looks to be giving off strong sell signals with its 6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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View our latest analysis for Anupam Rasayan India

How Has Anupam Rasayan India Performed Recently?

Anupam Rasayan India certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Anupam Rasayan India's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Anupam Rasayan India's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 70% last year. The strong recent performance means it was also able to grow revenue by 61% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 12% as estimated by the five analysts watching the company. That's shaping up to be materially lower than the 15% growth forecast for the broader industry.

With this information, we find it concerning that Anupam Rasayan India is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Anupam Rasayan India's P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've concluded that Anupam Rasayan India currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Anupam Rasayan India with six simple checks will allow you to discover any risks that could be an issue.

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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.