Genus Power Infrastructures Limited's (NSE:GENUSPOWER) 36% Jump Shows Its Popularity With Investors

Genus Power Infrastructures Limited (NSE:GENUSPOWER) shareholders would be excited to see that the share price has had a great month, posting a 36% gain and recovering from prior weakness. The annual gain comes to 246% following the latest surge, making investors sit up and take notice.

After such a large jump in price, you could be forgiven for thinking Genus Power Infrastructures is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 8.7x, considering almost half the companies in India's Electronic industry have P/S ratios below 3.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Genus Power Infrastructures

How Genus Power Infrastructures Has Been Performing

With revenue growth that's inferior to most other companies of late, Genus Power Infrastructures has been relatively sluggish. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Genus Power Infrastructures' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Genus Power Infrastructures?

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

If we review the last year of revenue growth, the company posted a terrific increase of 25%. Pleasingly, revenue has also lifted 47% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 134% as estimated by the lone analyst watching the company. That's shaping up to be materially higher than the 35% growth forecast for the broader industry.

In light of this, it's understandable that Genus Power Infrastructures' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Genus Power Infrastructures' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Our look into Genus Power Infrastructures shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Genus Power Infrastructures, and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on Genus Power Infrastructures, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.