FSN E-Commerce Ventures Limited's (NSE:NYKAA) P/S Still Appears To Be Reasonable

FSN E-Commerce Ventures Limited's (NSE:NYKAA) price-to-sales (or "P/S") ratio of 8.5x may look like a poor investment opportunity when you consider close to half the companies in the Specialty Retail industry in India have P/S ratios below 1.4x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for FSN E-Commerce Ventures

What Does FSN E-Commerce Ventures' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, FSN E-Commerce Ventures has been relatively sluggish. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on FSN E-Commerce Ventures will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The High P/S?

FSN E-Commerce Ventures' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. The latest three year period has also seen an excellent 104% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 25% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 23% per year, which is noticeably less attractive.

In light of this, it's understandable that FSN E-Commerce Ventures' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On FSN E-Commerce Ventures' P/S

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 FSN E-Commerce Ventures maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Specialty Retail industry, as expected. 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.

It is also worth noting that we have found 1 warning sign for FSN E-Commerce Ventures that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.