Saudi Company for Hardware SACO's (TADAWUL:4008) Shares Lagging The Industry But So Is The Business

When you see that almost half of the companies in the Specialty Retail industry in Saudi Arabia have price-to-sales ratios (or "P/S") above 1.6x, Saudi Company for Hardware SACO (TADAWUL:4008) looks to be giving off some buy signals with its 1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

View our latest analysis for Saudi Company for Hardware SACO

What Does Saudi Company for Hardware SACO's Recent Performance Look Like?

Saudi Company for Hardware SACO's revenue growth of late has been pretty similar to most other companies. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Saudi Company for Hardware SACO will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Saudi Company for Hardware SACO?

In order to justify its P/S ratio, Saudi Company for Hardware SACO would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Still, lamentably revenue has fallen 12% in aggregate from three years ago, which is disappointing. 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 one analyst covering the company suggest revenue should grow by 11% per annum over the next three years. With the industry predicted to deliver 15% growth per annum, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Saudi Company for Hardware SACO's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Saudi Company for Hardware SACO's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Saudi Company for Hardware SACO's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Saudi Company for Hardware SACO with six simple checks will allow you to discover any risks that could be an issue.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.