Jai Balaji Industries Limited (NSE:JAIBALAJI) Not Flying Under The Radar

When close to half the companies in the Metals and Mining industry in India have price-to-sales ratios (or "P/S") below 1.2x, you may consider Jai Balaji Industries Limited (NSE:JAIBALAJI) as a stock to potentially avoid with its 2.3x 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.

View our latest analysis for Jai Balaji Industries

What Does Jai Balaji Industries' P/S Mean For Shareholders?

The recent revenue growth at Jai Balaji Industries would have to be considered satisfactory if not spectacular. Perhaps the market believes the recent revenue performance is strong enough to outperform the industry, which has inflated the P/S ratio. 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 Jai Balaji Industries will help you shine a light on its historical performance.

How Is Jai Balaji Industries' Revenue Growth Trending?

In order to justify its P/S ratio, Jai Balaji Industries would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a decent 4.7% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 130% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

This is in contrast to the rest of the industry, which is expected to grow by 14% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in consideration, it's not hard to understand why Jai Balaji Industries' P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On Jai Balaji Industries' P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Jai Balaji Industries revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Jai Balaji Industries (1 doesn't sit too well with us) you should be aware of.

If you're unsure about the strength of Jai Balaji Industries' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com