Aksh Optifibre Limited (NSE:AKSHOPTFBR) Stock Catapults 35% Though Its Price And Business Still Lag The Industry

Aksh Optifibre Limited (NSE:AKSHOPTFBR) shareholders would be excited to see that the share price has had a great month, posting a 35% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 26%.

Even after such a large jump in price, Aksh Optifibre may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.8x, considering almost half of all companies in the Communications industry in India have P/S ratios greater than 2.6x and even P/S higher than 7x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Aksh Optifibre

How Aksh Optifibre Has Been Performing

For instance, Aksh Optifibre's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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 Aksh Optifibre's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Aksh Optifibre?

Aksh Optifibre's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

This is in contrast to the rest of the industry, which is expected to grow by 41% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Aksh Optifibre's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Aksh Optifibre's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Aksh Optifibre's P/S close to the industry median. 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.

In line with expectations, Aksh Optifibre maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you take the next step, you should know about the 1 warning sign for Aksh Optifibre that we have uncovered.

If you're unsure about the strength of Aksh Optifibre's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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