Sadbhav Infrastructure Project Limited's (NSE:SADBHIN) Low P/S No Reason For Excitement

You may think that with a price-to-sales (or "P/S") ratio of 0.2x Sadbhav Infrastructure Project Limited (NSE:SADBHIN) is definitely a stock worth checking out, seeing as almost half of all the Infrastructure companies in India have P/S ratios greater than 2.8x and even P/S above 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Sadbhav Infrastructure Project

How Has Sadbhav Infrastructure Project Performed Recently?

Sadbhav Infrastructure Project could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on Sadbhav Infrastructure Project will help you uncover what's on the horizon.

How Is Sadbhav Infrastructure Project's Revenue Growth Trending?

Sadbhav Infrastructure Project's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 14%. As a result, revenue from three years ago have also fallen 64% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 2.0% as estimated by the lone analyst watching the company. Meanwhile, the broader industry is forecast to expand by 41%, which paints a poor picture.

With this information, we are not surprised that Sadbhav Infrastructure Project is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What Does Sadbhav Infrastructure Project's P/S Mean For Investors?

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.

It's clear to see that Sadbhav Infrastructure Project maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - Sadbhav Infrastructure Project has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

If you're unsure about the strength of Sadbhav Infrastructure Project'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.