Market Cool On Arabia Insurance Cooperative Company's (TADAWUL:8160) Revenues

There wouldn't be many who think Arabia Insurance Cooperative Company's (TADAWUL:8160) price-to-sales (or "P/S") ratio of 1.3x is worth a mention when the median P/S for the Insurance industry in Saudi Arabia is similar at about 1.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Arabia Insurance Cooperative

How Arabia Insurance Cooperative Has Been Performing

With revenue growth that's exceedingly strong of late, Arabia Insurance Cooperative has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. 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 not quite in favour.

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

Is There Some Revenue Growth Forecasted For Arabia Insurance Cooperative?

In order to justify its P/S ratio, Arabia Insurance Cooperative would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 66% last year. The strong recent performance means it was also able to grow revenue by 147% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 3.3% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Arabia Insurance Cooperative's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

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

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.

We've established that Arabia Insurance Cooperative currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Arabia Insurance Cooperative, and understanding should be part of your investment process.

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.