Market Might Still Lack Some Conviction On The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company (TADAWUL:8030) Even After 26% Share Price Boost

The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company (TADAWUL:8030) shares have continued their recent momentum with a 26% gain in the last month alone. The annual gain comes to 239% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, it would still be understandable if you think Mediterranean and Gulf Cooperative Insurance and Reinsurance is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.9x, considering almost half the companies in Saudi Arabia's Insurance industry have P/S ratios above 1.4x. 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

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. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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.

Do Revenue Forecasts Match The Low P/S Ratio?

Mediterranean and Gulf Cooperative Insurance and Reinsurance's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. The strong recent performance means it was also able to grow revenue by 104% 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.

When compared to the industry's one-year growth forecast of 22%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's peculiar that Mediterranean and Gulf Cooperative Insurance and Reinsurance's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Mediterranean and Gulf Cooperative Insurance and Reinsurance's P/S

Mediterranean and Gulf Cooperative Insurance and Reinsurance's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We're very surprised to see Mediterranean and Gulf Cooperative Insurance and Reinsurance currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you take the next step, you should know about the 1 warning sign for Mediterranean and Gulf Cooperative Insurance and Reinsurance that we have uncovered.

If these risks are making you reconsider your opinion on Mediterranean and Gulf Cooperative Insurance and Reinsurance, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.