With A 25% Price Drop For B&B Triplewall Containers Limited (NSE:BBTCL) You'll Still Get What You Pay For

To the annoyance of some shareholders, B&B Triplewall Containers Limited (NSE:BBTCL) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 47% in that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about B&B Triplewall Containers' P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Packaging industry in India is also close to 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for B&B Triplewall Containers

What Does B&B Triplewall Containers' Recent Performance Look Like?

The revenue growth achieved at B&B Triplewall Containers over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on B&B Triplewall Containers will help you shine a light on its historical performance.

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

In order to justify its P/S ratio, B&B Triplewall Containers would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 28% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 51% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 14% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this in consideration, it's clear to see why B&B Triplewall Containers' P/S matches up closely to its industry peers. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

What Does B&B Triplewall Containers' P/S Mean For Investors?

Following B&B Triplewall Containers' share price tumble, its P/S is just clinging on to the industry median P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we've seen, B&B Triplewall Containers' three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Plus, you should also learn about these 3 warning signs we've spotted with B&B Triplewall Containers (including 1 which shouldn't be ignored).

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.