Why Investors Shouldn't Be Surprised By National Industrialization Company's (TADAWUL:2060) P/S

With a median price-to-sales (or "P/S") ratio of close to 1.6x in the Chemicals industry in Saudi Arabia, you could be forgiven for feeling indifferent about National Industrialization Company's (TADAWUL:2060) P/S ratio of 2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for National Industrialization

How National Industrialization Has Been Performing

With revenue growth that's superior to most other companies of late, National Industrialization has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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.

Keen to find out how analysts think National Industrialization's future stacks up against the industry? In that case, our free report is a great place to start.

How Is National Industrialization's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like National Industrialization's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a worthy increase of 6.9%. Still, lamentably revenue has fallen 9.9% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 1.6% per year as estimated by the dual analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 3.0% per annum, which is not materially different.

In light of this, it's understandable that National Industrialization's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

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.

A National Industrialization's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Chemicals industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Before you settle on your opinion, we've discovered 2 warning signs for National Industrialization (1 is a bit concerning!) that you should be aware of.

If these risks are making you reconsider your opinion on National Industrialization, 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.