Sindhu Trade Links Limited's (NSE:SINDHUTRAD) Share Price Is Still Matching Investor Opinion Despite 26% Slump

Sindhu Trade Links Limited (NSE:SINDHUTRAD) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Looking at the bigger picture, even after this poor month the stock is up 43% in the last year.

Although its price has dipped substantially, given close to half the companies operating in India's Logistics industry have price-to-sales ratios (or "P/S") below 0.6x, you may still consider Sindhu Trade Links as a stock to potentially avoid with its 2.4x 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 Sindhu Trade Links

How Has Sindhu Trade Links Performed Recently?

Revenue has risen at a steady rate over the last year for Sindhu Trade Links, which is generally not a bad outcome. Perhaps the market believes the recent revenue performance is strong enough to outperform the industry, which has inflated the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Sindhu Trade Links will help you shine a light on its historical performance.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Sindhu Trade Links' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 2.7%. This was backed up an excellent period prior to see revenue up by 70% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in consideration, it's not hard to understand why Sindhu Trade Links' P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From Sindhu Trade Links' P/S?

Despite the recent share price weakness, Sindhu Trade Links' P/S remains higher than most other companies in the industry. 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.

We've established that Sindhu Trade Links maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Before you settle on your opinion, we've discovered 2 warning signs for Sindhu Trade Links (1 is concerning!) that you should be aware of.

If these risks are making you reconsider your opinion on Sindhu Trade Links, 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.