Fawaz Abdulaziz Al Hokair & Company (TADAWUL:4240) Stock Catapults 29% Though Its Price And Business Still Lag The Industry

Despite an already strong run, Fawaz Abdulaziz Al Hokair & Company (TADAWUL:4240) shares have been powering on, with a gain of 29% in the last thirty days. The annual gain comes to 167% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, considering around half the companies operating in Saudi Arabia's Specialty Retail industry have price-to-sales ratios (or "P/S") above 1.4x, you may still consider Fawaz Abdulaziz Al Hokair as an solid investment opportunity with its 0.7x 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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See our latest analysis for Fawaz Abdulaziz Al Hokair

How Has Fawaz Abdulaziz Al Hokair Performed Recently?

Fawaz Abdulaziz Al Hokair's revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

Keen to find out how analysts think Fawaz Abdulaziz Al Hokair'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 Fawaz Abdulaziz Al Hokair?

In order to justify its P/S ratio, Fawaz Abdulaziz Al Hokair 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. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 17% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 3.1% during the coming year according to the four analysts following the company. That's shaping up to be materially lower than the 14% growth forecast for the broader industry.

With this information, we can see why Fawaz Abdulaziz Al Hokair is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Fawaz Abdulaziz Al Hokair's P/S?

Despite Fawaz Abdulaziz Al Hokair's share price climbing recently, its P/S still lags most other companies. 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.

As we suspected, our examination of Fawaz Abdulaziz Al Hokair'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. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Fawaz Abdulaziz Al Hokair that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.