There's No Escaping Fawaz Abdulaziz Al Hokair & Company's (TADAWUL:4240) Muted Revenues Despite A 26% Share Price Rise

Despite an already strong run, Fawaz Abdulaziz Al Hokair & Company (TADAWUL:4240) shares have been powering on, with a gain of 26% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 28% in the last twelve months.

Even after such a large jump in price, considering around half the companies operating in Saudi Arabia's Specialty Retail industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Fawaz Abdulaziz Al Hokair as an solid investment opportunity with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Fawaz Abdulaziz Al Hokair

How Fawaz Abdulaziz Al Hokair Has Been Performing

Fawaz Abdulaziz Al Hokair could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Fawaz Abdulaziz Al Hokair.

Is There Any Revenue Growth Forecasted For Fawaz Abdulaziz Al Hokair?

Fawaz Abdulaziz Al Hokair's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.9%. As a result, revenue from three years ago have also fallen 5.6% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 1.4% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 9.5% per annum, which is noticeably more attractive.

With this in consideration, its clear as to why Fawaz Abdulaziz Al Hokair's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

The latest share price surge wasn't enough to lift Fawaz Abdulaziz Al Hokair's P/S close to the industry median. 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.

We've established that Fawaz Abdulaziz Al Hokair maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Fawaz Abdulaziz Al Hokair (of which 2 shouldn't be ignored!) you should know about.

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).

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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.