Saudi Pharmaceutical Industries and Medical Appliances Corporation (TADAWUL:2070) Not Lagging Industry On Growth Or Pricing

It's not a stretch to say that Saudi Pharmaceutical Industries and Medical Appliances Corporation's (TADAWUL:2070) price-to-sales (or "P/S") ratio of 2.9x right now seems quite "middle-of-the-road" for companies in the Pharmaceuticals industry in Saudi Arabia, where the median P/S ratio is around 2.5x. 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.

View our latest analysis for Saudi Pharmaceutical Industries and Medical Appliances

How Saudi Pharmaceutical Industries and Medical Appliances Has Been Performing

Recent times haven't been great for Saudi Pharmaceutical Industries and Medical Appliances as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Saudi Pharmaceutical Industries and Medical Appliances.

Is There Some Revenue Growth Forecasted For Saudi Pharmaceutical Industries and Medical Appliances?

Saudi Pharmaceutical Industries and Medical Appliances' 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 19%. Revenue has also lifted 11% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 11% per year over the next three years. That's shaping up to be similar to the 11% per year growth forecast for the broader industry.

In light of this, it's understandable that Saudi Pharmaceutical Industries and Medical Appliances' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Saudi Pharmaceutical Industries and Medical Appliances' P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A Saudi Pharmaceutical Industries and Medical Appliances' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Pharmaceuticals industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

It is also worth noting that we have found 2 warning signs for Saudi Pharmaceutical Industries and Medical Appliances that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.