Not Many Are Piling Into Sharjah Cement and Industrial Development Co. (PJSC) (ADX:SCIDC) Just Yet

When you see that almost half of the companies in the Basic Materials industry in the United Arab Emirates have price-to-sales ratios (or "P/S") above 1.7x, Sharjah Cement and Industrial Development Co. (PJSC) (ADX:SCIDC) looks to be giving off some buy signals with its 0.6x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Sharjah Cement and Industrial Development (PJSC)

How Sharjah Cement and Industrial Development (PJSC) Has Been Performing

For example, consider that Sharjah Cement and Industrial Development (PJSC)'s financial performance has been pretty ordinary lately as revenue growth is non-existent. Perhaps the market believes the recent lacklustre revenue performance is a sign of future underperformance relative to industry peers, hurting the P/S. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for Sharjah Cement and Industrial Development (PJSC), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Sharjah Cement and Industrial Development (PJSC)'s 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 virtually the same number to the company's top line as the year before. Still, the latest three year period has seen an excellent 46% overall rise in revenue, in spite of its uninspiring short-term performance. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Comparing that to the industry, which is predicted to shrink 1.6% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.

With this information, we find it very odd that Sharjah Cement and Industrial Development (PJSC) is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Sharjah Cement and Industrial Development (PJSC)'s P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at the figures, it's surprising to see Sharjah Cement and Industrial Development (PJSC) currently trades on a much lower than expected P/S since its recent three-year revenue growth is beating forecasts for a struggling industry. We think potential risks might be placing significant pressure on the P/S ratio and share price. The most obvious risk is that its revenue trajectory may not keep outperforming under these tough industry conditions. While the chance of the share price dropping sharply is fairly remote, investors do seem to be anticipating future revenue instability.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Sharjah Cement and Industrial Development (PJSC) (2 are potentially serious!) that you should be aware of before investing here.

If you're unsure about the strength of Sharjah Cement and Industrial Development (PJSC)'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.