The Price Is Right For Zinka Logistics Solutions Limited (NSE:BLACKBUCK)

With a price-to-sales (or "P/S") ratio of 19.5x Zinka Logistics Solutions Limited (NSE:BLACKBUCK) may be sending very bearish signals at the moment, given that almost half of all the Software companies in India have P/S ratios under 4.1x and even P/S lower than 1.8x are not unusual. 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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View our latest analysis for Zinka Logistics Solutions

How Has Zinka Logistics Solutions Performed Recently?

With revenue growth that's superior to most other companies of late, Zinka Logistics Solutions has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zinka Logistics Solutions.

How Is Zinka Logistics Solutions' Revenue Growth Trending?

In order to justify its P/S ratio, Zinka Logistics Solutions would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 44%. Pleasingly, revenue has also lifted 258% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 27% per year during the coming three years according to the six analysts following the company. With the industry only predicted to deliver 16% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Zinka Logistics Solutions' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Zinka Logistics Solutions' 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.

As we suspected, our examination of Zinka Logistics Solutions' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Zinka Logistics Solutions with six simple checks on some of these key factors.

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.