Further Upside For Walaa Cooperative Insurance Company (TADAWUL:8060) Shares Could Introduce Price Risks After 26% Bounce

Walaa Cooperative Insurance Company (TADAWUL:8060) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 115% in the last year.

Although its price has surged higher, there still wouldn't be many who think Walaa Cooperative Insurance's price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S in Saudi Arabia's Insurance industry is similar at about 1.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Walaa Cooperative Insurance

How Walaa Cooperative Insurance Has Been Performing

Walaa Cooperative Insurance could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Walaa Cooperative Insurance.

Do Revenue Forecasts Match The P/S Ratio?

Walaa Cooperative Insurance's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 114% 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.

Turning to the outlook, the next year should generate growth of 77% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 19%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Walaa Cooperative Insurance's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Walaa Cooperative Insurance's P/S?

Its shares have lifted substantially and now Walaa Cooperative Insurance's P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Despite enticing revenue growth figures that outpace the industry, Walaa Cooperative Insurance's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

You always need to take note of risks, for example - Walaa Cooperative Insurance has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on Walaa Cooperative Insurance, 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.