Puravankara Limited's (NSE:PURVA) Subdued P/S Might Signal An Opportunity

You may think that with a price-to-sales (or "P/S") ratio of 2.9x Puravankara Limited (NSE:PURVA) is definitely a stock worth checking out, seeing as almost half of all the Real Estate companies in India have P/S ratios greater than 6.6x and even P/S above 16x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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View our latest analysis for Puravankara

What Does Puravankara's Recent Performance Look Like?

Puravankara could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Puravankara.

How Is Puravankara's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 8.5% decrease to the company's top line. Even so, admirably revenue has lifted 111% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 63% during the coming year according to the only analyst following the company. With the industry only predicted to deliver 41%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Puravankara's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

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

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.

A look at Puravankara's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Plus, you should also learn about these 2 warning signs we've spotted with Puravankara.

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