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Meghmani Organics Limited's (NSE:MOL) Price Is Right But Growth Is Lacking After Shares Rocket 28%

Simply Wall St · 06/03/2025 00:56

Meghmani Organics Limited (NSE:MOL) shares have continued their recent momentum with a 28% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 10% is also fairly reasonable.

In spite of the firm bounce in price, Meghmani Organics may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1x, considering almost half of all companies in the Chemicals industry in India have P/S ratios greater than 1.5x and even P/S higher than 4x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Meghmani Organics

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NSEI:MOL Price to Sales Ratio vs Industry June 3rd 2025

What Does Meghmani Organics' Recent Performance Look Like?

Meghmani Organics certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Meghmani Organics?

Meghmani Organics' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 36% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 15% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 14% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that Meghmani Organics' P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

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The Final Word

Meghmani Organics' stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Meghmani Organics confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Before you take the next step, you should know about the 2 warning signs for Meghmani Organics that we have uncovered.

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.