Gulf Pharmaceutical Industries P.S.C.'s (ADX:JULPHAR) Share Price Boosted 42% But Its Business Prospects Need A Lift Too

Gulf Pharmaceutical Industries P.S.C. (ADX:JULPHAR) shareholders have had their patience rewarded with a 42% share price jump in the last month. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.6% in the last twelve months.

Although its price has surged higher, Gulf Pharmaceutical Industries P.S.C may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Pharmaceuticals industry in the United Arab Emirates have P/S ratios greater than 2.6x and even P/S higher than 6x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Gulf Pharmaceutical Industries P.S.C

How Has Gulf Pharmaceutical Industries P.S.C Performed Recently?

Gulf Pharmaceutical Industries P.S.C hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.

Keen to find out how analysts think Gulf Pharmaceutical Industries P.S.C's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

Gulf Pharmaceutical Industries P.S.C'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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.9%. Still, the latest three year period has seen an excellent 194% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 11% as estimated by the lone analyst watching the company. That's shaping up to be materially lower than the 22% growth forecast for the broader industry.

In light of this, it's understandable that Gulf Pharmaceutical Industries P.S.C's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Gulf Pharmaceutical Industries P.S.C's P/S?

The latest share price surge wasn't enough to lift Gulf Pharmaceutical Industries P.S.C's P/S close to the industry median. 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 Gulf Pharmaceutical Industries P.S.C's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Gulf Pharmaceutical Industries P.S.C that 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.

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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.