Market Participants Recognise Bharti Airtel Limited's (NSE:BHARTIARTL) Revenues

When close to half the companies in the Wireless Telecom industry in India have price-to-sales ratios (or "P/S") below 1.5x, you may consider Bharti Airtel Limited (NSE:BHARTIARTL) as a stock to avoid entirely with its 6.4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Bharti Airtel

How Has Bharti Airtel Performed Recently?

Bharti Airtel certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Bharti Airtel's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Bharti Airtel's 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 worthy increase of 6.3%. This was backed up an excellent period prior to see revenue up by 45% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 13% each year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 6.2% each year, which is noticeably less attractive.

With this information, we can see why Bharti Airtel is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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 look into Bharti Airtel 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 these conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 2 warning signs for Bharti Airtel (1 can't be ignored!) that we have uncovered.

If you're unsure about the strength of Bharti Airtel'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.