Stock Analysis

Why Yanbu Cement Company (TADAWUL:3060) Could Be Worth Watching

SASE:3060
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While Yanbu Cement Company (TADAWUL:3060) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the SASE over the last few months. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Yanbu Cement’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Yanbu Cement

What's the opportunity in Yanbu Cement?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 40.47x is currently well-above the industry average of 26.47x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Yanbu Cement’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Yanbu Cement look like?

earnings-and-revenue-growth
SASE:3060 Earnings and Revenue Growth April 12th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Yanbu Cement's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 3060’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 3060 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 3060 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 3060, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Yanbu Cement, you'd also look into what risks it is currently facing. For example, Yanbu Cement has 3 warning signs (and 1 which is significant) we think you should know about.

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

Valuation is complex, but we're helping make it simple.

Find out whether Yanbu Cement is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.