Market Might Still Lack Some Conviction On Kellton Tech Solutions Limited (NSE:KELLTONTEC) Even After 26% Share Price Boost

Despite an already strong run, Kellton Tech Solutions Limited (NSE:KELLTONTEC) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 145% in the last year.

Even after such a large jump in price, Kellton Tech Solutions' price-to-sales (or "P/S") ratio of 1.3x might still make it look like a strong buy right now compared to the wider IT industry in India, where around half of the companies have P/S ratios above 4.4x and even P/S above 10x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for Kellton Tech Solutions

How Has Kellton Tech Solutions Performed Recently?

The revenue growth achieved at Kellton Tech Solutions over the last year would be more than acceptable for most companies. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Kellton Tech Solutions 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 Kellton Tech Solutions' earnings, revenue and cash flow.

How Is Kellton Tech Solutions' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 10%. The solid recent performance means it was also able to grow revenue by 26% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 7.9% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it odd that Kellton Tech Solutions is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can maintain recent growth rates.

The Key Takeaway

Even after such a strong price move, Kellton Tech Solutions' P/S still trails the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Kellton Tech Solutions revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. medium-term

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

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.