Investors Appear Satisfied With V2 Retail Limited's (NSE:V2RETAIL) Prospects As Shares Rocket 27%

Despite an already strong run, V2 Retail Limited (NSE:V2RETAIL) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days were the cherry on top of the stock's 438% gain in the last year, which is nothing short of spectacular.

Although its price has surged higher, there still wouldn't be many who think V2 Retail's price-to-sales (or "P/S") ratio of 1.7x is worth a mention when the median P/S in India's Specialty Retail industry is similar at about 1.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for V2 Retail

What Does V2 Retail's Recent Performance Look Like?

Recent times have been quite advantageous for V2 Retail as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on V2 Retail will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 V2 Retail's earnings, revenue and cash flow.

How Is V2 Retail's Revenue Growth Trending?

In order to justify its P/S ratio, V2 Retail would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 39% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 116% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 32% shows it's about the same on an annualised basis.

With this information, we can see why V2 Retail is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Its shares have lifted substantially and now V2 Retail's P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It appears to us that V2 Retail maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Having said that, be aware V2 Retail is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of V2 Retail's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.