Stock Analysis

Investors Holding Back On The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company (TADAWUL:8030)

SASE:8030
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When close to half the companies operating in the Insurance industry in Saudi Arabia have price-to-sales ratios (or "P/S") above 1.2x, you may consider The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company (TADAWUL:8030) as an attractive investment with its 0.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Mediterranean and Gulf Cooperative Insurance and Reinsurance

ps-multiple-vs-industry
SASE:8030 Price to Sales Ratio vs Industry February 9th 2024

What Does Mediterranean and Gulf Cooperative Insurance and Reinsurance's P/S Mean For Shareholders?

Mediterranean and Gulf Cooperative Insurance and Reinsurance has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. Those who are bullish on Mediterranean and Gulf Cooperative Insurance and Reinsurance will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

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 Mediterranean and Gulf Cooperative Insurance and Reinsurance's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. The latest three year period has also seen an excellent 68% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to decline by 0.3% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

In light of this, it's quite peculiar that Mediterranean and Gulf Cooperative Insurance and Reinsurance's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

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.

Looking at the figures, it's surprising to see Mediterranean and Gulf Cooperative Insurance and Reinsurance currently trades on a much lower than expected P/S since its recent three-year revenue growth is beating forecasts for a struggling industry. There could be some major unobserved threats to revenue preventing the P/S ratio from matching this positive performance. The most obvious risk is that its revenue trajectory may not keep outperforming under these tough industry conditions. While the chance of the share price dropping sharply is fairly remote, investors do seem to be anticipating future revenue instability.

Before you settle on your opinion, we've discovered 1 warning sign for Mediterranean and Gulf Cooperative Insurance and Reinsurance that you should be aware of.

If you're unsure about the strength of Mediterranean and Gulf Cooperative Insurance and Reinsurance's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Valuation is complex, but we're helping make it simple.

Find out whether Mediterranean and Gulf Cooperative Insurance and Reinsurance is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.