After Leaping 27% Kaynes Technology India Limited (NSE:KAYNES) Shares Are Not Flying Under The Radar

Kaynes Technology India Limited (NSE:KAYNES) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The annual gain comes to 142% following the latest surge, making investors sit up and take notice.

After such a large jump in price, you could be forgiven for thinking Kaynes Technology India is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 12x, considering almost half the companies in India's Electronic industry have P/S ratios below 2.9x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Kaynes Technology India

What Does Kaynes Technology India's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Kaynes Technology India has been doing relatively well. 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.

Keen to find out how analysts think Kaynes Technology India's 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 Kaynes Technology India?

In order to justify its P/S ratio, Kaynes Technology India would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 60%. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 47% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 26% per year, which is noticeably less attractive.

In light of this, it's understandable that Kaynes Technology India's 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.

What Does Kaynes Technology India's P/S Mean For Investors?

Kaynes Technology India's 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.

We've established that Kaynes Technology India maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware Kaynes Technology India is showing 3 warning signs in our investment analysis, and 1 of those is concerning.

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.