Borosil Renewables Limited (NSE:BORORENEW) Shares Fly 27% But Investors Aren't Buying For Growth

Borosil Renewables Limited (NSE:BORORENEW) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 38%.

Although its price has surged higher, Borosil Renewables may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.7x, since almost half of all companies in the Semiconductor industry in India have P/S ratios greater than 7.5x and even P/S higher than 22x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Borosil Renewables

How Has Borosil Renewables Performed Recently?

Revenue has risen at a steady rate over the last year for Borosil Renewables, which is generally not a bad outcome. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Borosil Renewables will help you shine a light on its historical performance.

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

There's an inherent assumption that a company should underperform the industry for P/S ratios like Borosil Renewables' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 3.5%. This was backed up an excellent period prior to see revenue up by 115% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is predicted to deliver 10,009% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Borosil Renewables is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From Borosil Renewables' P/S?

Despite Borosil Renewables' share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

In line with expectations, Borosil Renewables maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you settle on your opinion, we've discovered 2 warning signs for Borosil Renewables that you should be aware of.

If you're unsure about the strength of Borosil Renewables' 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.