Optimistic Investors Push Jayaswal Neco Industries Limited (NSE:JAYNECOIND) Shares Up 29% But Growth Is Lacking

Jayaswal Neco Industries Limited (NSE:JAYNECOIND) shareholders have had their patience rewarded with a 29% share price jump in the last month. The last month tops off a massive increase of 135% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Jayaswal Neco Industries' P/S ratio of 1.3x, since the median price-to-sales (or "P/S") ratio for the Metals and Mining industry in India is also close to 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

View our latest analysis for Jayaswal Neco Industries

What Does Jayaswal Neco Industries' P/S Mean For Shareholders?

Jayaswal Neco Industries has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on Jayaswal Neco Industries will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 Jayaswal Neco Industries' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

Jayaswal Neco Industries' 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.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. The latest three year period has also seen a 9.9% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 19% shows it's noticeably less attractive.

With this information, we find it interesting that Jayaswal Neco Industries is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What We Can Learn From Jayaswal Neco Industries' P/S?

Jayaswal Neco Industries' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Jayaswal Neco Industries revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Jayaswal Neco Industries (1 is significant) you should be aware of.

If you're unsure about the strength of Jayaswal Neco Industries' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.