Market Participants Recognise Rawasi Albina Investment Co.'s (TADAWUL:9547) Revenues Pushing Shares 27% Higher

Rawasi Albina Investment Co. (TADAWUL:9547) shares have continued their recent momentum with a 27% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 33% in the last year.

After such a large jump in price, given close to half the companies operating in Saudi Arabia's Construction industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Rawasi Albina Investment as a stock to potentially avoid with its 1.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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Check out our latest analysis for Rawasi Albina Investment

How Rawasi Albina Investment Has Been Performing

With revenue growth that's exceedingly strong of late, Rawasi Albina Investment has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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 Rawasi Albina Investment's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Rawasi Albina Investment?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Rawasi Albina Investment's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 57%. The strong recent performance means it was also able to grow revenue by 61% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 13% shows it's noticeably more attractive.

In light of this, it's understandable that Rawasi Albina Investment's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On Rawasi Albina Investment's P/S

The large bounce in Rawasi Albina Investment's shares has lifted the company's P/S handsomely. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Rawasi Albina Investment maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

You need to take note of risks, for example - Rawasi Albina Investment has 4 warning signs (and 3 which are significant) we think you should know about.

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.