MSP Steel & Power Limited's (NSE:MSPL) Price Is Right But Growth Is Lacking After Shares Rocket 54%

MSP Steel & Power Limited (NSE:MSPL) shares have continued their recent momentum with a 54% gain in the last month alone. The last 30 days were the cherry on top of the stock's 307% gain in the last year, which is nothing short of spectacular.

Although its price has surged higher, considering around half the companies operating in India's Metals and Mining industry have price-to-sales ratios (or "P/S") above 1.4x, you may still consider MSP Steel & Power as an solid investment opportunity with its 0.7x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for MSP Steel & Power

What Does MSP Steel & Power's Recent Performance Look Like?

The revenue growth achieved at MSP Steel & Power over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For MSP Steel & Power?

There's an inherent assumption that a company should underperform the industry for P/S ratios like MSP Steel & Power's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 15%. This was backed up an excellent period prior to see revenue up by 48% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 16% shows it's noticeably less attractive.

With this information, we can see why MSP Steel & Power is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does MSP Steel & Power's P/S Mean For Investors?

Despite MSP Steel & Power's share price climbing recently, its P/S still lags most other companies. 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.

In line with expectations, MSP Steel & Power maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with MSP Steel & Power, and understanding should be part of your investment process.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.