Al Hassan Ghazi Ibrahim Shaker Company (TADAWUL:1214) Shares May Have Slumped 25% But Getting In Cheap Is Still Unlikely

To the annoyance of some shareholders, Al Hassan Ghazi Ibrahim Shaker Company (TADAWUL:1214) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 40% in that time.

Although its price has dipped substantially, there still wouldn't be many who think Al Hassan Ghazi Ibrahim Shaker's price-to-earnings (or "P/E") ratio of 28.2x is worth a mention when the median P/E in Saudi Arabia is similar at about 28x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Al Hassan Ghazi Ibrahim Shaker certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for Al Hassan Ghazi Ibrahim Shaker

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Al Hassan Ghazi Ibrahim Shaker will help you shine a light on its historical performance.

How Is Al Hassan Ghazi Ibrahim Shaker's Growth Trending?

The only time you'd be comfortable seeing a P/E like Al Hassan Ghazi Ibrahim Shaker's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 58%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 17% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's curious that Al Hassan Ghazi Ibrahim Shaker's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent earnings trends is likely to weigh down the shares eventually.

What We Can Learn From Al Hassan Ghazi Ibrahim Shaker's P/E?

With its share price falling into a hole, the P/E for Al Hassan Ghazi Ibrahim Shaker looks quite average now. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Al Hassan Ghazi Ibrahim Shaker currently trades on a higher than expected P/E since its recent three-year growth is lower than the wider market forecast. Right now we are uncomfortable with the P/E as this earnings performance isn't likely to support a more positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware Al Hassan Ghazi Ibrahim Shaker is showing 2 warning signs in our investment analysis, and 1 of those is significant.

If these risks are making you reconsider your opinion on Al Hassan Ghazi Ibrahim Shaker, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.