It's Down 27% But Albaad Massuot Yitzhak Ltd (TLV:ALBA) Could Be Riskier Than It Looks

Albaad Massuot Yitzhak Ltd (TLV:ALBA) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 46%, which is great even in a bull market.

Since its price has dipped substantially, given about half the companies operating in Israel's Household Products industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider Albaad Massuot Yitzhak as an attractive investment with its 0.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Albaad Massuot Yitzhak

How Has Albaad Massuot Yitzhak Performed Recently?

Revenue has risen firmly for Albaad Massuot Yitzhak recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. Those who are bullish on Albaad Massuot Yitzhak will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Albaad Massuot Yitzhak, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Albaad Massuot Yitzhak's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Albaad Massuot Yitzhak's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. The latest three year period has also seen a 20% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 8.3% shows it's about the same on an annualised basis.

In light of this, it's peculiar that Albaad Massuot Yitzhak's P/S sits below the majority of other companies. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Key Takeaway

The southerly movements of Albaad Massuot Yitzhak's shares means its P/S is now sitting at a pretty low level. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Albaad Massuot Yitzhak revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Albaad Massuot Yitzhak (1 doesn't sit too well with us!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.