Abu Dhabi National Company for Building Materials PJSC (ADX:BILDCO) Stocks Pounded By 28% But Not Lagging Industry On Growth Or Pricing

Abu Dhabi National Company for Building Materials PJSC (ADX:BILDCO) shares have retraced a considerable 28% in the last month, reversing a fair amount of their solid recent performance. Looking at the bigger picture, even after this poor month the stock is up 32% in the last year.

Even after such a large drop in price, when almost half of the companies in the United Arab Emirates' Basic Materials industry have price-to-sales ratios (or "P/S") below 1.8x, you may still consider Abu Dhabi National Company for Building Materials PJSC as a stock probably not worth researching with its 2.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for Abu Dhabi National Company for Building Materials PJSC

What Does Abu Dhabi National Company for Building Materials PJSC's P/S Mean For Shareholders?

Abu Dhabi National Company for Building Materials PJSC certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Abu Dhabi National Company for Building Materials PJSC, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Abu Dhabi National Company for Building Materials PJSC's Revenue Growth Trending?

Abu Dhabi National Company for Building Materials PJSC's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 65%. Revenue has also lifted 27% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 2.4% shows it's a great look while it lasts.

With this information, we can see why Abu Dhabi National Company for Building Materials PJSC is trading at a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the industry. Nonetheless, with most other businesses facing an uphill battle, staying on its current revenue path is no certainty.

The Bottom Line On Abu Dhabi National Company for Building Materials PJSC's P/S

There's still some elevation in Abu Dhabi National Company for Building Materials PJSC's P/S, even if the same can't be said for its share price recently. 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.

As we suspected, our examination of Abu Dhabi National Company for Building Materials PJSC revealed its growing revenue over the medium-term is helping prop up its high P/S compared to its peers, given the industry is set to shrink. Right now shareholders are comfortable with the P/S as they are quite confident revenues aren't under threat. We still remain cautious about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. Otherwise, it's hard to see the share price falling strongly in the near future if its revenue performance persists.

You should always think about risks. Case in point, we've spotted 2 warning signs for Abu Dhabi National Company for Building Materials PJSC you should be aware of, and 1 of them is a bit concerning.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.