Investors Interested In Advanced Petrochemical Company's (TADAWUL:2330) Revenues

When you see that almost half of the companies in the Chemicals industry in Saudi Arabia have price-to-sales ratios (or "P/S") below 1.8x, Advanced Petrochemical Company (TADAWUL:2330) looks to be giving off some sell signals with its 3.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for Advanced Petrochemical

What Does Advanced Petrochemical's Recent Performance Look Like?

Recent times haven't been great for Advanced Petrochemical as its revenue has been falling quicker than most other companies. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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

How Is Advanced Petrochemical's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.5%. The last three years don't look nice either as the company has shrunk revenue by 23% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 105% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 5.4%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Advanced Petrochemical's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

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 Advanced Petrochemical maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Chemicals industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Advanced Petrochemical (3 are potentially serious!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Advanced Petrochemical, 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.