Take Care Before Diving Into The Deep End On JITF Infralogistics Limited (NSE:JITFINFRA)

With a price-to-sales (or "P/S") ratio of 0.3x JITF Infralogistics Limited (NSE:JITFINFRA) may be sending bullish signals at the moment, given that almost half of all the Infrastructure companies in India have P/S ratios greater than 1.9x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

We've discovered 3 warning signs about JITF Infralogistics. View them for free.

Check out our latest analysis for JITF Infralogistics

How JITF Infralogistics Has Been Performing

As an illustration, revenue has deteriorated at JITF Infralogistics over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on JITF Infralogistics will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for JITF Infralogistics, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For JITF Infralogistics?

JITF Infralogistics' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 5.4%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 128% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 8.3% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that JITF Infralogistics' P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of JITF Infralogistics revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with JITF Infralogistics (including 2 which are concerning).

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.