Revenues Tell The Story For Mahindra Logistics Limited (NSE:MAHLOG) As Its Stock Soars 25%

Despite an already strong run, Mahindra Logistics Limited (NSE:MAHLOG) shares have been powering on, with a gain of 25% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 21% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Mahindra Logistics' price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in India's Logistics industry is similar at about 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Check out our latest analysis for Mahindra Logistics

What Does Mahindra Logistics' P/S Mean For Shareholders?

Mahindra Logistics' revenue growth of late has been pretty similar to most other companies. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Mahindra Logistics.

Do Revenue Forecasts Match The P/S Ratio?

Mahindra Logistics' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 47% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 12% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 12% per year, which is not materially different.

With this information, we can see why Mahindra Logistics is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From Mahindra Logistics' P/S?

Its shares have lifted substantially and now Mahindra Logistics' P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that Mahindra Logistics maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

You should always think about risks. Case in point, we've spotted 2 warning signs for Mahindra Logistics you should be aware of, and 1 of them is potentially serious.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.