Tihama Advertising and Public Relations Co. (TADAWUL:4070) May Have Run Too Fast Too Soon With Recent 66% Price Plummet

The Tihama Advertising and Public Relations Co. (TADAWUL:4070) share price has fared very poorly over the last month, falling by a substantial 66%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 82% loss during that time.

Although its price has dipped substantially, it's still not a stretch to say that Tihama Advertising and Public Relations' price-to-sales (or "P/S") ratio of 1.2x right now seems quite "middle-of-the-road" compared to the Media industry in Saudi Arabia, where the median P/S ratio is around 1.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Tihama Advertising and Public Relations

What Does Tihama Advertising and Public Relations' Recent Performance Look Like?

The revenue growth achieved at Tihama Advertising and Public Relations over the last year would be more than acceptable for most companies. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tihama Advertising and Public Relations will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

Tihama Advertising and Public Relations' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 28%. The latest three year period has also seen a 16% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 12% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Tihama Advertising and Public Relations is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On Tihama Advertising and Public Relations' P/S

Following Tihama Advertising and Public Relations' share price tumble, its P/S is just clinging on to the industry median P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Tihama Advertising and Public Relations revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Tihama Advertising and Public Relations (3 make us uncomfortable) you should be aware of.

If you're unsure about the strength of Tihama Advertising and Public Relations' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.