C. E. Info Systems Limited's (NSE:MAPMYINDIA) P/S Is Still On The Mark Following 27% Share Price Bounce

Despite an already strong run, C. E. Info Systems Limited (NSE:MAPMYINDIA) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.

After such a large jump in price, C. E. Info Systems' price-to-sales (or "P/S") ratio of 36.1x might make it look like a strong sell right now compared to other companies in the Software industry in India, where around half of the companies have P/S ratios below 4.7x and even P/S below 2x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for C. E. Info Systems

How C. E. Info Systems Has Been Performing

C. E. Info Systems certainly has been doing a good job lately as it's been growing revenue more than most other companies. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on C. E. Info Systems.

Is There Enough Revenue Growth Forecasted For C. E. Info Systems?

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

Taking a look back first, we see that the company grew revenue by an impressive 35% last year. The strong recent performance means it was also able to grow revenue by 149% in total over the last three years. 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 36% per year during the coming three years according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 18% per annum, which is noticeably less attractive.

With this information, we can see why C. E. Info Systems is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

C. E. Info Systems' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 look into C. E. Info Systems shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

You need to take note of risks, for example - C. E. Info Systems has 2 warning signs (and 1 which is significant) we think 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.

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