Batic Investments and Logistics Company's (TADAWUL:4110) 26% Price Boost Is Out Of Tune With Revenues

Batic Investments and Logistics Company (TADAWUL:4110) shares have continued their recent momentum with a 26% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 36%.

Following the firm bounce in price, given around half the companies in Saudi Arabia's Industrials industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Batic Investments and Logistics as a stock to avoid entirely with its 4.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Batic Investments and Logistics

How Has Batic Investments and Logistics Performed Recently?

Revenue has risen firmly for Batic Investments and Logistics recently, which is pleasing to see. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Batic Investments and Logistics' Revenue Growth Trending?

In order to justify its P/S ratio, Batic Investments and Logistics would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a decent 12% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 7.0% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 3.4% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's alarming that Batic Investments and Logistics' P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

What Does Batic Investments and Logistics' P/S Mean For Investors?

Shares in Batic Investments and Logistics have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've established that Batic Investments and Logistics currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. Right now we aren't comfortable with the high P/S as this revenue performance is highly unlikely to support such positive sentiment for long. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Batic Investments and Logistics (1 shouldn't be ignored) you should be aware 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.