Lancor Holdings Limited's (NSE:LANCORHOL) Price Is Right But Growth Is Lacking After Shares Rocket 27%

Lancor Holdings Limited (NSE:LANCORHOL) shareholders have had their patience rewarded with a 27% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 43% over that time.

In spite of the firm bounce in price, Lancor Holdings' price-to-sales (or "P/S") ratio of 1x might still make it look like a strong buy right now compared to the wider Real Estate industry in India, where around half of the companies have P/S ratios above 6.4x and even P/S above 16x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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See our latest analysis for Lancor Holdings

How Has Lancor Holdings Performed Recently?

Lancor Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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 Lancor Holdings' earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Lancor Holdings?

The only time you'd be truly comfortable seeing a P/S as depressed as Lancor Holdings' is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 34% last year. The strong recent performance means it was also able to grow revenue by 72% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 36% shows it's noticeably less attractive.

With this information, we can see why Lancor Holdings is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Lancor Holdings' P/S Mean For Investors?

Shares in Lancor Holdings have risen appreciably however, its P/S is still subdued. 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.

In line with expectations, Lancor Holdings maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

There are also other vital risk factors to consider and we've discovered 5 warning signs for Lancor Holdings (2 make us uncomfortable!) that you should be aware of before investing here.

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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.