Abdulmohsen Al-Hokair Group for Tourism and Development Company's (TADAWUL:1820) Shares Bounce 26% But Its Business Still Trails The Industry

Despite an already strong run, Abdulmohsen Al-Hokair Group for Tourism and Development Company (TADAWUL:1820) shares have been powering on, with a gain of 26% in the last thirty days. The last 30 days bring the annual gain to a very sharp 31%.

Although its price has surged higher, Abdulmohsen Al-Hokair Group for Tourism and Development may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.3x, since almost half of all companies in the Hospitality industry in Saudi Arabia have P/S ratios greater than 2.5x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Abdulmohsen Al-Hokair Group for Tourism and Development

How Abdulmohsen Al-Hokair Group for Tourism and Development Has Been Performing

With revenue growth that's inferior to most other companies of late, Abdulmohsen Al-Hokair Group for Tourism and Development has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Abdulmohsen Al-Hokair Group for Tourism and Development's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Abdulmohsen Al-Hokair Group for Tourism and Development's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 8.9%. Revenue has also lifted 9.2% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 7.6% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 16%, which is noticeably more attractive.

In light of this, it's understandable that Abdulmohsen Al-Hokair Group for Tourism and Development's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

The latest share price surge wasn't enough to lift Abdulmohsen Al-Hokair Group for Tourism and Development's P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Abdulmohsen Al-Hokair Group for Tourism and Development's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Abdulmohsen Al-Hokair Group for Tourism and Development (1 doesn't sit too well with us) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.