AstraZeneca Pharma India Limited's (NSE:ASTRAZEN) Earnings Haven't Escaped The Attention Of Investors

When close to half the companies in the Pharmaceuticals industry in India have price-to-sales ratios (or "P/S") below 3.3x, you may consider AstraZeneca Pharma India Limited (NSE:ASTRAZEN) as a stock to avoid entirely with its 12x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for AstraZeneca Pharma India

How AstraZeneca Pharma India Has Been Performing

AstraZeneca Pharma India certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on AstraZeneca Pharma India's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For AstraZeneca Pharma India?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like AstraZeneca Pharma India's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 30% gain to the company's top line. Pleasingly, revenue has also lifted 74% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 13% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in consideration, it's not hard to understand why AstraZeneca Pharma India's 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.

What Does AstraZeneca Pharma India's P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that AstraZeneca Pharma India maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for AstraZeneca Pharma India that you should be aware of.

If these risks are making you reconsider your opinion on AstraZeneca Pharma India, 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.