Barak Valley Cements Limited (NSE:BVCL) Doing What It Can To Lift Shares

Barak Valley Cements Limited's (NSE:BVCL) price-to-sales (or "P/S") ratio of 0.6x might make it look like a buy right now compared to the Basic Materials industry in India, where around half of the companies have P/S ratios above 1.7x 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 Barak Valley Cements

What Does Barak Valley Cements' P/S Mean For Shareholders?

Revenue has risen firmly for Barak Valley Cements recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

How Is Barak Valley Cements' Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. The latest three year period has also seen an excellent 56% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

In contrast to the company, the rest of the industry is expected to decline by 9.1% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

With this information, we find it very odd that Barak Valley Cements is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What We Can Learn From Barak Valley Cements' P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Upon analysing the past data, we see it is unexpected that Barak Valley Cements is currently trading at a lower P/S than the rest of the industry given that its revenue growth in the past three-year years is exceeding expectations in a challenging industry. There could be some major unobserved threats to revenue preventing the P/S ratio from matching this positive performance. Amidst challenging industry conditions, perhaps a key concern is whether the company can sustain its superior revenue growth trajectory. It appears many are indeed anticipating revenue instability, because this relative performance should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Barak Valley Cements that you should be aware of.

If these risks are making you reconsider your opinion on Barak Valley Cements, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.