Take Care Before Jumping Onto Arabian International Healthcare Holding Company (TADAWUL:9530) Even Though It's 25% Cheaper

Unfortunately for some shareholders, the Arabian International Healthcare Holding Company (TADAWUL:9530) share price has dived 25% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 33% share price drop.

After such a large drop in price, Arabian International Healthcare Holding's price-to-sales (or "P/S") ratio of 0.6x might make it look like a strong buy right now compared to the wider Healthcare industry in Saudi Arabia, where around half of the companies have P/S ratios above 3x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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See our latest analysis for Arabian International Healthcare Holding

How Arabian International Healthcare Holding Has Been Performing

Arabian International Healthcare Holding has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Arabian International Healthcare Holding will help you shine a light on its historical performance.

How Is Arabian International Healthcare Holding's Revenue Growth Trending?

In order to justify its P/S ratio, Arabian International Healthcare Holding would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. Pleasingly, revenue has also lifted 52% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

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

With this in consideration, we find it intriguing that Arabian International Healthcare Holding's P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

What We Can Learn From Arabian International Healthcare Holding's P/S?

Arabian International Healthcare Holding's P/S looks about as weak as its stock price lately. 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.

The fact that Arabian International Healthcare Holding currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. medium-term

We don't want to rain on the parade too much, but we did also find 3 warning signs for Arabian International Healthcare Holding that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.