Subdued Growth No Barrier To Brigade Enterprises Limited (NSE:BRIGADE) With Shares Advancing 26%

Brigade Enterprises Limited (NSE:BRIGADE) shareholders have had their patience rewarded with a 26% share price jump in the last month. The annual gain comes to 134% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, there still wouldn't be many who think Brigade Enterprises' price-to-sales (or "P/S") ratio of 7.3x is worth a mention when the median P/S in India's Real Estate industry is similar at about 7.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Brigade Enterprises

How Has Brigade Enterprises Performed Recently?

Brigade Enterprises could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Brigade Enterprises?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Brigade Enterprises' to be considered reasonable.

Retrospectively, the last year delivered a decent 14% gain to the company's revenues. Pleasingly, revenue has also lifted 125% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 23% as estimated by the twelve analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 37%, which is noticeably more attractive.

With this in mind, we find it intriguing that Brigade Enterprises' P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does Brigade Enterprises' P/S Mean For Investors?

Its shares have lifted substantially and now Brigade Enterprises' P/S is back within range of the industry median. 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.

When you consider that Brigade Enterprises' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

You always need to take note of risks, for example - Brigade Enterprises has 1 warning sign we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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