The Market Lifts Qatar General Insurance & Reinsurance Company Q.P.S.C. (DSM:QGRI) Shares 27% But It Can Do More

Qatar General Insurance & Reinsurance Company Q.P.S.C. (DSM:QGRI) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 16% is also fairly reasonable.

Although its price has surged higher, there still wouldn't be many who think Qatar General Insurance & Reinsurance Company Q.P.S.C's price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S in Qatar's Insurance industry is similar at about 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

We've discovered 2 warning signs about Qatar General Insurance & Reinsurance Company Q.P.S.C. View them for free.

See our latest analysis for Qatar General Insurance & Reinsurance Company Q.P.S.C

How Qatar General Insurance & Reinsurance Company Q.P.S.C Has Been Performing

With revenue growth that's exceedingly strong of late, Qatar General Insurance & Reinsurance Company Q.P.S.C has been doing very well. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on Qatar General Insurance & Reinsurance Company Q.P.S.C 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 Qatar General Insurance & Reinsurance Company Q.P.S.C's earnings, revenue and cash flow.

How Is Qatar General Insurance & Reinsurance Company Q.P.S.C's Revenue Growth Trending?

In order to justify its P/S ratio, Qatar General Insurance & Reinsurance Company Q.P.S.C would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 59%. Pleasingly, revenue has also lifted 98% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 7.2% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Qatar General Insurance & Reinsurance Company Q.P.S.C's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Qatar General Insurance & Reinsurance Company Q.P.S.C's P/S?

Qatar General Insurance & Reinsurance Company Q.P.S.C appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We've established that Qatar General Insurance & Reinsurance Company Q.P.S.C currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Qatar General Insurance & Reinsurance Company Q.P.S.C (at least 1 which can't be ignored), and understanding them should be part of your investment process.

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.