V2 Retail Limited's (NSE:V2RETAIL) Share Price Matching Investor Opinion

V2 Retail Limited's (NSE:V2RETAIL) price-to-sales (or "P/S") ratio of 3.8x 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. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for V2 Retail

How Has V2 Retail Performed Recently?

With revenue growth that's superior to most other companies of late, V2 Retail has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think V2 Retail's future stacks up against the industry? In that case, our free report is a great place to start .

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as V2 Retail's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 58% gain to the company's top line. Pleasingly, revenue has also lifted 155% 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.

Looking ahead now, revenue is anticipated to climb by 52% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 27%, which is noticeably less attractive.

In light of this, it's understandable that V2 Retail's 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 Key Takeaway

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.

As we suspected, our examination of V2 Retail's 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.

It is also worth noting that we have found 1 warning sign for V2 Retail that you need to take into consideration.

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.