Market Cool On Nuvoco Vistas Corporation Limited's (NSE:NUVOCO) Revenues

With a price-to-sales (or "P/S") ratio of 1.2x Nuvoco Vistas Corporation Limited (NSE:NUVOCO) may be sending bullish signals at the moment, given that almost half of all the Basic Materials companies in India have P/S ratios greater than 2x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Nuvoco Vistas

What Does Nuvoco Vistas' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Nuvoco Vistas' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Nuvoco Vistas' future stacks up against the industry? In that case, our free report is a great place to start.

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

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

Retrospectively, the last year delivered a frustrating 6.0% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 13% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue growth will be highly resilient over the next year growing by 8.3%. With the rest of the industry predicted to shrink by 4.2%, that would be a fantastic result.

In light of this, it's quite peculiar that Nuvoco Vistas' P/S sits below the majority of other companies. It looks like most investors aren't convinced at all that the company can achieve positive future growth in the face of a shrinking broader industry.

What Does Nuvoco Vistas' P/S Mean For Investors?

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.

Our examination of Nuvoco Vistas' analyst forecasts revealed that its superior revenue outlook against a shaky industry isn't contributing to its P/S anywhere near as much as we would have predicted. When we see a superior revenue outlook with some actual growth, we can only assume investor uncertainty is what's been suppressing the P/S figures. Perhaps there is some hesitation about the company's ability to keep swimming against the current of the broader industry turmoil. So, the risk of a price drop looks to be subdued, but investors seem to think future revenue could see a lot of volatility.

Plus, you should also learn about these 2 warning signs we've spotted with Nuvoco Vistas (including 1 which doesn't sit too well with us).

If these risks are making you reconsider your opinion on Nuvoco Vistas, 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.