Sharjah Cement and Industrial Development Co. (PJSC)'s (ADX:SCIDC) Shares Lagging The Industry But So Is The Business

Sharjah Cement and Industrial Development Co. (PJSC)'s (ADX:SCIDC) price-to-sales (or "P/S") ratio of 0.7x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Basic Materials industry in the United Arab Emirates have P/S ratios greater than 1.6x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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

What Does Sharjah Cement and Industrial Development (PJSC)'s P/S Mean For Shareholders?

The revenue growth achieved at Sharjah Cement and Industrial Development (PJSC) over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on Sharjah Cement and Industrial Development (PJSC) will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Sharjah Cement and Industrial Development (PJSC)'s earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Sharjah Cement and Industrial Development (PJSC)?

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.

If we review the last year of revenue growth, the company posted a terrific increase of 29%. As a result, it also grew revenue by 9.5% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 16% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Sharjah Cement and Industrial Development (PJSC) is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Sharjah Cement and Industrial Development (PJSC)'s P/S?

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.

In line with expectations, Sharjah Cement and Industrial Development (PJSC) maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Sharjah Cement and Industrial Development (PJSC) (at least 1 which is a bit concerning), and understanding these should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.