Vinyas Innovative Technologies Limited (NSE:VINYAS) Stock Rockets 45% As Investors Are Less Pessimistic Than Expected

Despite an already strong run, Vinyas Innovative Technologies Limited (NSE:VINYAS) shares have been powering on, with a gain of 45% in the last thirty days. Looking further back, the 18% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Since its price has surged higher, given close to half the companies operating in India's Electronic industry have price-to-sales ratios (or "P/S") below 2.5x, you may consider Vinyas Innovative Technologies as a stock to potentially avoid with its 3.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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View our latest analysis for Vinyas Innovative Technologies

How Has Vinyas Innovative Technologies Performed Recently?

The revenue growth achieved at Vinyas Innovative Technologies over the last year would be more than acceptable for most companies. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. However, if this isn't the case, investors might get caught out paying too much for the stock.

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 Vinyas Innovative Technologies' earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Vinyas Innovative Technologies?

Vinyas Innovative Technologies' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered an exceptional 26% gain to the company's top line. Pleasingly, revenue has also lifted 93% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 31% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's alarming that Vinyas Innovative Technologies' P/S sits above the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Key Takeaway

Vinyas Innovative Technologies' P/S is on the rise since its shares have risen strongly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Vinyas Innovative Technologies revealed its poor three-year revenue trends aren't detracting from the P/S as much as we though, given they look worse than current industry expectations. When we see slower than industry revenue growth but an elevated P/S, there's considerable risk of the share price declining, sending the P/S lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these the share price as being reasonable.

Plus, you should also learn about this 1 warning sign we've spotted with Vinyas Innovative Technologies.

If these risks are making you reconsider your opinion on Vinyas Innovative Technologies, 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.