Kaya Limited (NSE:KAYA) Stock Catapults 25%, Though Price and Revenue Still Lagging the Industry

Despite an already strong run, Kaya Limited (NSE:KAYA) Shares are on the rise, having gained 25% in the last thirty days. The last 30 days bring annual gains to a very sharp 25%.

Although the price has gone up, Kaya may still look like a strong buying opportunity right now with a price-to-sales ratio (or ‘P/S’) of 1.5x, as almost half of all companies in the consumer services sector in India has price-to-earnings ratios of more than 5x and even a price-to-earnings ratio of more than 18x is not uncommon. Nevertheless, we need to dig a little deeper to determine if there is a rational basis for the sharply reduced P/S.

Check out our latest analysis for Kaya

NSEI:KAYA Price-to-Sales Ratio vs. Industry June 15, 2024

How has Kaya been performing lately?

Kaya’s revenue has been steadily increasing over the past year, which isn’t a bad result overall. Perhaps the market believes that recent revenue performance will lag that of the industry for the foreseeable future, which could lead to a lower price-to-earnings ratio. If you like the company, you hope you don’t, so you can potentially pick up some shares while it’s out of favor.

While there are no analyst estimates available for Kaya, check this out free data-rich visualization to see how the company is doing in terms of revenue, revenue and cash flow.

Do the revenue forecasts match the low price-earnings ratio?

To justify the price-to-earnings ratio, Kaya would have to deliver anemic growth that substantially lags the industry.

Looking at the past year of revenue growth, the company recorded a worthy increase of 7.3%. Over the past three years there has also been an excellent overall revenue growth of 47%, helped somewhat by near-term performance. Therefore, it’s fair to say that revenue growth has been fantastic for the company lately.

This is in contrast to the rest of the industry, which is expected to grow 18% over the next year, which is significantly higher than the company’s recent medium-term annualized growth rates.

With this information, we can see why Kaya is trading at a lower price-to-earnings ratio than the industry. It appears that most investors expect the recent limited growth rates to continue in the future and are only willing to pay a lower amount for the stock.

What does Kaya’s P/S mean for investors?

Kaya’s recent share price rise still fails to bring its price-to-earnings ratio in line with the industry median. It’s not wise to use price-to-sales ratio alone to determine whether you should sell your shares, but it can provide a practical guide to the company’s future prospects.

In line with expectations, Kaya maintains its low price-to-earnings ratio as the weakness in recent three-year growth is lower than the broader industry forecast. At this point, shareholders accept the low price-to-earnings ratio, as they admit that future earnings are unlikely to deliver any pleasant surprises. Unless recent conditions improve over the medium term, they will continue to be a barrier to the share price around these levels.

And what about other risks? Every company has them, and we’ve seen them 5 warning signs for Kaya (3 of which are potentially serious!) that you need to be aware of.

If companies with solid past earnings growth are for youyou might want to see this free collection of other companies with strong earnings growth and low price/earnings ratios.

Valuation is complex, but we help make it simple.

Find out if Kaya may be over or undervalued by checking out our comprehensive analysis, including: fair value estimates, risks and cautions, dividends, insider transactions and financial health.

View the Free Analysis

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.

Valuation is complex, but we help make it simple.

Find out if Kaya may be over or undervalued by checking out our comprehensive analysis, including: fair value estimates, risks and cautions, dividends, insider transactions and financial health.

View the Free Analysis

Do you have feedback on this article? Worried about the content? Please contact us directly. You can also send an email to [email protected]