Market Cool On Ghitha Holding P.J.S.C's (ADX:GHITHA) Revenues Pushing Shares 28% Lower

Unfortunately for some shareholders, the Ghitha Holding P.J.S.C (ADX:GHITHA) share price has dived 28% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 24% share price drop.

In spite of the heavy fall in price, when close to half the companies operating in the United Arab Emirates' Consumer Retailing industry have price-to-sales ratios (or "P/S") above 1.6x, you may still consider Ghitha Holding P.J.S.C as an enticing stock to check out with its 0.8x P/S ratio. 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 Ghitha Holding P.J.S.C

What Does Ghitha Holding P.J.S.C's P/S Mean For Shareholders?

Revenue has risen firmly for Ghitha Holding P.J.S.C recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Although there are no analyst estimates available for Ghitha Holding P.J.S.C, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Ghitha Holding P.J.S.C?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Ghitha Holding P.J.S.C's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.0% last year. Pleasingly, revenue has also lifted 223% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 9.7% shows it's noticeably more attractive.

With this information, we find it odd that Ghitha Holding P.J.S.C is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

The southerly movements of Ghitha Holding P.J.S.C's shares means its P/S is now sitting at a pretty low level. 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.

We're very surprised to see Ghitha Holding P.J.S.C currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

You need to take note of risks, for example - Ghitha Holding P.J.S.C has 2 warning signs (and 1 which is concerning) we think you should know about.

If you're unsure about the strength of Ghitha Holding P.J.S.C's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.