A Piece Of The Puzzle Missing From Saudi Kayan Petrochemical Company's (TADAWUL:2350) Share Price

When close to half the companies operating in the Chemicals industry in Saudi Arabia have price-to-sales ratios (or "P/S") above 1.8x, you may consider Saudi Kayan Petrochemical Company (TADAWUL:2350) as an attractive investment with its 0.9x 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.

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View our latest analysis for Saudi Kayan Petrochemical

How Has Saudi Kayan Petrochemical Performed Recently?

With revenue growth that's superior to most other companies of late, Saudi Kayan Petrochemical has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Any Revenue Growth Forecasted For Saudi Kayan Petrochemical?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 6.9% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 34% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 0.2% over the next year. With the industry predicted to deliver 1.6% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Saudi Kayan Petrochemical is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Saudi Kayan Petrochemical's P/S Mean For Investors?

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.

It looks to us like the P/S figures for Saudi Kayan Petrochemical remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Saudi Kayan Petrochemical with six simple checks.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.