The Market Lifts Sharjah Cement and Industrial Development Co. (PJSC) (ADX:SCIDC) Shares 26% But It Can Do More

The Sharjah Cement and Industrial Development Co. (PJSC) (ADX:SCIDC) share price has done very well over the last month, posting an excellent gain of 26%. Looking back a bit further, it's encouraging to see the stock is up 32% in the last year.

Although its price has surged higher, Sharjah Cement and Industrial Development (PJSC)'s price-to-sales (or "P/S") ratio of 0.7x might still make it look like a buy right now compared to the Basic Materials industry in the United Arab Emirates, where around half of the companies have P/S ratios above 2.3x and even P/S above 8x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

The end of cancer? These 15 emerging AI stocks are developing tech that will allow early identification of life changing diseases like cancer and Alzheimer's.

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

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

Sharjah Cement and Industrial Development (PJSC) has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Sharjah Cement and Industrial Development (PJSC) will help you shine a light on its historical performance.

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

There's an inherent assumption that a company should underperform the industry for P/S ratios like Sharjah Cement and Industrial Development (PJSC)'s to be considered reasonable.

Retrospectively, the last year delivered a decent 7.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 38% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 2.6%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it odd that Sharjah Cement and Industrial Development (PJSC) 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.

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

Despite Sharjah Cement and Industrial Development (PJSC)'s share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We're very surprised to see Sharjah Cement and Industrial Development (PJSC) 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 robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward 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 always need to take note of risks, for example - Sharjah Cement and Industrial Development (PJSC) has 2 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.