Market Still Lacking Some Conviction On ReNew Energy Global Plc (NASDAQ:RNW)

With a median price-to-sales (or "P/S") ratio of close to 2.1x in the Renewable Energy industry in the United States, you could be forgiven for feeling indifferent about ReNew Energy Global Plc's (NASDAQ:RNW) P/S ratio of 2.3x. 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.

See our latest analysis for ReNew Energy Global

How Has ReNew Energy Global Performed Recently?

Recent times have been advantageous for ReNew Energy Global as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on ReNew Energy Global will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, ReNew Energy Global would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. Pleasingly, revenue has also lifted 82% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 15% per annum during the coming three years according to the seven analysts following the company. With the industry only predicted to deliver 7.8% per year, the company is positioned for a stronger revenue result.

With this information, we find it interesting that ReNew Energy Global is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does ReNew Energy Global's P/S Mean For Investors?

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.

Despite enticing revenue growth figures that outpace the industry, ReNew Energy Global's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 4 warning signs for ReNew Energy Global (of which 2 are potentially serious!) you should know about.

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.

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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.