Genesys International Corporation Limited (NSE:GENESYS) Looks Just Right With A 38% Price Jump

Genesys International Corporation Limited (NSE:GENESYS) shares have had a really impressive month, gaining 38% after a shaky period beforehand. The last month tops off a massive increase of 117% in the last year.

Following the firm bounce in price, Genesys International may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 13.6x, since almost half of all companies in the IT industry in India have P/S ratios under 4.4x and even P/S lower than 2x 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.

See our latest analysis for Genesys International

What Does Genesys International's Recent Performance Look Like?

The revenue growth achieved at Genesys International over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Genesys International?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 9.4% last year. This was backed up an excellent period prior to see revenue up by 149% 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.

This is in contrast to the rest of the industry, which is expected to grow by 5.8% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Genesys International's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On Genesys International's P/S

Shares in Genesys International have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

As we suspected, our examination of Genesys International revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Genesys International (1 is significant!) that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com