Trigyn Technologies Limited (NSE:TRIGYN) Might Not Be As Mispriced As It Looks After Plunging 26%

Trigyn Technologies Limited (NSE:TRIGYN) shares have had a horrible month, losing 26% after a relatively good period beforehand. Longer-term, the stock has been solid despite a difficult 30 days, gaining 13% in the last year.

Although its price has dipped substantially, Trigyn Technologies' price-to-sales (or "P/S") ratio of 0.3x 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. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for Trigyn Technologies

What Does Trigyn Technologies' P/S Mean For Shareholders?

The recent revenue growth at Trigyn Technologies would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on Trigyn Technologies will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Trigyn Technologies, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

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

The only time you'd be truly comfortable seeing a P/S as depressed as Trigyn Technologies' is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 3.9% last year. The latest three year period has also seen an excellent 32% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

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 in consideration, we find it intriguing that Trigyn Technologies' P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

What We Can Learn From Trigyn Technologies' P/S?

Having almost fallen off a cliff, Trigyn Technologies' share price has pulled its P/S way down as well. 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.

The fact that Trigyn Technologies currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with Trigyn Technologies (including 1 which can't be ignored).

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.