There's No Escaping Takween Advanced Industries' (TADAWUL:1201) Muted Revenues Despite A 25% Share Price Rise

Takween Advanced Industries (TADAWUL:1201) shares have continued their recent momentum with a 25% gain in the last month alone. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 7.8% over the last year.

Although its price has surged higher, given about half the companies operating in Saudi Arabia's Packaging industry have price-to-sales ratios (or "P/S") above 2x, you may still consider Takween Advanced Industries as an attractive investment with its 1x 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.

View our latest analysis for Takween Advanced Industries

How Takween Advanced Industries Has Been Performing

Takween Advanced Industries hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Takween Advanced Industries will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Takween Advanced Industries' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. Even so, admirably revenue has lifted 55% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the only analyst following the company. With the industry predicted to deliver 16% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Takween Advanced Industries' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Takween Advanced Industries' P/S

The latest share price surge wasn't enough to lift Takween Advanced Industries' P/S close to the industry median. 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.

As we suspected, our examination of Takween Advanced Industries' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Takween Advanced Industries has 2 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.