What You Can Learn From Prestige Estates Projects Limited's (NSE:PRESTIGE) P/S

With a price-to-sales (or "P/S") ratio of 9.2x Prestige Estates Projects Limited (NSE:PRESTIGE) may be sending very bearish signals at the moment, given that almost half of all the Real Estate companies in India have P/S ratios under 5.7x and even P/S lower than 2x are not unusual. 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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

View our latest analysis for Prestige Estates Projects

What Does Prestige Estates Projects' Recent Performance Look Like?

Prestige Estates Projects could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Keen to find out how analysts think Prestige Estates Projects' 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 Prestige Estates Projects?

In order to justify its P/S ratio, Prestige Estates Projects would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.5%. Regardless, revenue has managed to lift by a handy 12% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 68% during the coming year according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 44%, which is noticeably less attractive.

With this information, we can see why Prestige Estates Projects is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

As we suspected, our examination of Prestige Estates Projects' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

Having said that, be aware Prestige Estates Projects is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Prestige Estates Projects' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.