Hubtown Limited's (NSE:HUBTOWN) 30% Jump Shows Its Popularity With Investors

Hubtown Limited (NSE:HUBTOWN) shares have continued their recent momentum with a 30% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 38%.

Since its price has surged higher, Hubtown may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 11.4x, since almost half of all companies in the Real Estate industry in India have P/S ratios under 6.8x and even P/S lower than 3x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Hubtown

How Hubtown Has Been Performing

Hubtown's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Hubtown?

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

Taking a look back first, we see that the company grew revenue by an impressive 58% last year. Pleasingly, revenue has also lifted 115% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 204% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 50%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Hubtown's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Hubtown's P/S?

The strong share price surge has lead to Hubtown's P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Hubtown shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Hubtown that you should be aware of.

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