Zamil Industrial Investment Company (TADAWUL:2240) Not Doing Enough For Some Investors As Its Shares Slump 27%

Zamil Industrial Investment Company (TADAWUL:2240) shares have had a horrible month, losing 27% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 28%, which is great even in a bull market.

After such a large drop in price, Zamil Industrial Investment may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Metals and Mining industry in Saudi Arabia have P/S ratios greater than 1.6x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Zamil Industrial Investment

How Zamil Industrial Investment Has Been Performing

Recent times have been pleasing for Zamil Industrial Investment as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zamil Industrial Investment.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Zamil Industrial Investment's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 19% last year. The latest three year period has also seen an excellent 38% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 3.4% over the next year. That's shaping up to be materially lower than the 13% growth forecast for the broader industry.

With this in consideration, its clear as to why Zamil Industrial Investment's 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 Final Word

The southerly movements of Zamil Industrial Investment's shares means its P/S is now sitting at a pretty low level. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As expected, our analysis of Zamil Industrial Investment's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Zamil Industrial Investment.

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.