Sentiment Still Eluding Signatureglobal (India) Limited (NSE:SIGNATURE)

There wouldn't be many who think Signatureglobal (India) Limited's (NSE:SIGNATURE) price-to-sales (or "P/S") ratio of 6.6x is worth a mention when the median P/S for the Real Estate industry in India is similar at about 7.1x. 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 Signatureglobal (India)

How Signatureglobal (India) Has Been Performing

With revenue growth that's superior to most other companies of late, Signatureglobal (India) has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 114%. Pleasingly, revenue has also lifted 196% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 80% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 41%, which is noticeably less attractive.

With this information, we find it interesting that Signatureglobal (India) is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Signatureglobal (India) currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for Signatureglobal (India) you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.