The Market Doesn't Like What It Sees From Dishman Carbogen Amcis Limited's (NSE:DCAL) Revenues Yet

Simply Wall St · 10/15 00:21

With a price-to-sales (or "P/S") ratio of 1.2x Dishman Carbogen Amcis Limited (NSE:DCAL) may be sending very bullish signals at the moment, given that almost half of all the Life Sciences companies in India have P/S ratios greater than 3.7x and even P/S higher than 7x are not unusual. 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 Dishman Carbogen Amcis

ps-multiple-vs-industry
NSEI:DCAL Price to Sales Ratio vs Industry October 15th 2024

How Dishman Carbogen Amcis Has Been Performing

For example, consider that Dishman Carbogen Amcis' financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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 Dishman Carbogen Amcis' earnings, revenue and cash flow.

How Is Dishman Carbogen Amcis' Revenue Growth Trending?

Dishman Carbogen Amcis' 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.

Retrospectively, the last year delivered a frustrating 6.9% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 22% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing that to the industry, which is predicted to deliver 16% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Dishman Carbogen Amcis' P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Dishman Carbogen Amcis' P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Dishman Carbogen Amcis revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Dishman Carbogen Amcis (of which 1 doesn't sit too well with us!) 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.