Positive Sentiment Still Eludes Best Agrolife Limited (NSE:BESTAGRO) Following 49% Share Price Slump

Best Agrolife Limited (NSE:BESTAGRO) shareholders that were waiting for something to happen have been dealt a blow with a 49% share price drop in the last month. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

Although its price has dipped substantially, Best Agrolife's price-to-sales (or "P/S") ratio of 0.4x might still make it look like a buy right now compared to the Chemicals industry in India, where around half of the companies have P/S ratios above 1.5x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Best Agrolife

How Has Best Agrolife Performed Recently?

For example, consider that Best Agrolife's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on Best Agrolife will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Best Agrolife, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Best Agrolife's Revenue Growth Trending?

In order to justify its P/S ratio, Best Agrolife would need to produce sluggish growth that's trailing the industry.

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 16%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 51% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate 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 information, we find it odd that Best Agrolife is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Bottom Line On Best Agrolife's P/S

Best Agrolife's recently weak share price has pulled its P/S back below other Chemicals companies. 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.

The fact that Best Agrolife currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

Plus, you should also learn about these 4 warning signs we've spotted with Best Agrolife (including 1 which can't be ignored).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.