Investors Appear Satisfied With AstraZeneca Pharma India Limited's (NSE:ASTRAZEN) Prospects

When close to half the companies in the Pharmaceuticals industry in India have price-to-sales ratios (or "P/S") below 3.1x, you may consider AstraZeneca Pharma India Limited (NSE:ASTRAZEN) as a stock to avoid entirely with its 12.3x 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.

See 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on AstraZeneca Pharma India will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For AstraZeneca Pharma India?

AstraZeneca Pharma India's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 30%. Pleasingly, revenue has also lifted 89% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's understandable that AstraZeneca Pharma India's P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On AstraZeneca Pharma India's P/S

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.

As we suspected, our examination of AstraZeneca Pharma India 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.

Plus, you should also learn about these 3 warning signs we've spotted with AstraZeneca Pharma India (including 1 which is potentially serious).

If you're unsure about the strength of AstraZeneca Pharma India's 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.