The Price Is Right For Camlin Fine Sciences Limited (NSE:CAMLINFINE) Even After Diving 31%

Explore Camlin Fine Sciences's Fair Values from the Community and select yours

The Camlin Fine Sciences Limited (NSE:CAMLINFINE) share price has softened a substantial 31% over the previous 30 days, handing back much of the gains the stock has made lately. The good news is that in the last year, the stock has shone bright like a diamond, gaining 102%.

Although its price has dipped substantially, when almost half of the companies in India's Chemicals industry have price-to-sales ratios (or "P/S") below 1.5x, you may still consider Camlin Fine Sciences as a stock probably not worth researching with its 2.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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See our latest analysis for Camlin Fine Sciences

How Camlin Fine Sciences Has Been Performing

With revenue growth that's inferior to most other companies of late, Camlin Fine Sciences has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Camlin Fine Sciences will help you uncover what's on the horizon.

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

There's an inherent assumption that a company should outperform the industry for P/S ratios like Camlin Fine Sciences' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 7.5%. The latest three year period has also seen a 17% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 24% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 16%, which is noticeably less attractive.

With this information, we can see why Camlin Fine Sciences is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Camlin Fine Sciences' P/S Mean For Investors?

Camlin Fine Sciences' P/S remain high even after its stock plunged. 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.

As we suspected, our examination of Camlin Fine Sciences' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Camlin Fine Sciences that you need to be mindful of.

If you're unsure about the strength of Camlin Fine Sciences' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.