Market Participants Recognise Shree Vasu Logistics Limited's (NSE:SVLL) Revenues Pushing Shares 28% Higher

Shree Vasu Logistics Limited (NSE:SVLL) shares have continued their recent momentum with a 28% gain in the last month alone. The last month tops off a massive increase of 102% in the last year.

Following the firm bounce in price, when almost half of the companies in India's Logistics industry have price-to-sales ratios (or "P/S") below 1x, you may consider Shree Vasu Logistics as a stock not worth researching with its 3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Shree Vasu Logistics

What Does Shree Vasu Logistics' Recent Performance Look Like?

Revenue has risen firmly for Shree Vasu Logistics recently, which is pleasing to see. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Shree Vasu Logistics' earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Shree Vasu Logistics?

The only time you'd be truly comfortable seeing a P/S as steep as Shree Vasu Logistics' 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 terrific increase of 16%. The strong recent performance means it was also able to grow revenue by 73% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 14% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Shree Vasu Logistics' P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Final Word

The strong share price surge has lead to Shree Vasu Logistics' P/S soaring as well. 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.

As we suspected, our examination of Shree Vasu Logistics revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Shree Vasu Logistics is showing 5 warning signs in our investment analysis, and 3 of those are significant.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.