Revenues Tell The Story For Bhagiradha Chemicals & Industries Limited (NSE:BHAGCHEM) As Its Stock Soars 25%

Bhagiradha Chemicals & Industries Limited (NSE:BHAGCHEM) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 67%.

After such a large jump in price, you could be forgiven for thinking Bhagiradha Chemicals & Industries is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4.4x, considering almost half the companies in India's Chemicals industry have P/S ratios below 1.6x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Bhagiradha Chemicals & Industries

How Bhagiradha Chemicals & Industries Has Been Performing

For instance, Bhagiradha Chemicals & Industries' receding revenue in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Bhagiradha Chemicals & Industries?

The only time you'd be truly comfortable seeing a P/S as steep as Bhagiradha Chemicals & Industries' 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 19%. Still, the latest three year period has seen an excellent 65% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

When compared to the industry's one-year growth forecast of 12%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's understandable that Bhagiradha Chemicals & Industries' P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On Bhagiradha Chemicals & Industries' P/S

The strong share price surge has lead to Bhagiradha Chemicals & Industries' P/S soaring as well. 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.

It's no surprise that Bhagiradha Chemicals & Industries can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Bhagiradha Chemicals & Industries.

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.