At ر.س36.00, Is It Time To Put Saudi Industrial Investment Group (TADAWUL:2250) On Your Watch List?

Saudi Industrial Investment Group (TADAWUL:2250), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SASE. As a ر.س16b market cap stock, it seems odd Saudi Industrial Investment Group is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at Saudi Industrial Investment Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Saudi Industrial Investment Group

What is Saudi Industrial Investment Group worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Saudi Industrial Investment Group’s ratio of 14.26x is trading slightly below its industry peers’ ratio of 16.63x, which means if you buy Saudi Industrial Investment Group today, you’d be paying a decent price for it. And if you believe that Saudi Industrial Investment Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Saudi Industrial Investment Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Saudi Industrial Investment Group generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -14% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Saudi Industrial Investment Group. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, 2250 appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 2250, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 2250 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on 2250 should the price fluctuate below the industry PE ratio.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Saudi Industrial Investment Group has 3 warning signs (2 make us uncomfortable!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Saudi Industrial Investment Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.