Optiemus Infracom Limited's (NSE:OPTIEMUS) 28% Jump Shows Its Popularity With Investors

Optiemus Infracom Limited (NSE:OPTIEMUS) shares have had a really impressive month, gaining 28% after a shaky period beforehand. The annual gain comes to 131% following the latest surge, making investors sit up and take notice.

After such a large jump in price, when almost half of the companies in India's Electronic industry have price-to-sales ratios (or "P/S") below 2.8x, you may consider Optiemus Infracom as a stock probably not worth researching with its 3.5x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Optiemus Infracom

What Does Optiemus Infracom's Recent Performance Look Like?

Optiemus Infracom certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Although there are no analyst estimates available for Optiemus Infracom, 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 High P/S?

In order to justify its P/S ratio, Optiemus Infracom would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 59%. 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.

Comparing that to the industry, which is only predicted to deliver 43% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

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

What We Can Learn From Optiemus Infracom's P/S?

Optiemus Infracom shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Optiemus Infracom maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Optiemus Infracom that you should be aware of.

If you're unsure about the strength of Optiemus Infracom'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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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.