Astec LifeSciences Limited (NSE:ASTEC) Stocks Shoot Up 30% But Its P/S Still Looks Reasonable

Those holding Astec LifeSciences Limited (NSE:ASTEC) shares would be relieved that the share price has rebounded 30% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 13% in the last twelve months.

Since its price has surged higher, when almost half of the companies in India's Chemicals industry have price-to-sales ratios (or "P/S") below 1.3x, you may consider Astec LifeSciences as a stock not worth researching with its 4.9x 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.

View our latest analysis for Astec LifeSciences

How Astec LifeSciences Has Been Performing

With revenue that's retreating more than the industry's average of late, Astec LifeSciences has been very sluggish. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Astec LifeSciences' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Astec LifeSciences' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Astec LifeSciences' is when the company's growth is on track to outshine the industry decidedly.

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 44%. As a result, revenue from three years ago have also fallen 24% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 45% over the next year. That's shaping up to be materially higher than the 12% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Astec LifeSciences' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Astec LifeSciences' P/S Mean For Investors?

Shares in Astec LifeSciences have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 Astec LifeSciences shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You always need to take note of risks, for example - Astec LifeSciences has 1 warning sign we think you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.