Power and Water Utility Company for Jubail and Yanbu's (TADAWUL:2083) Business Is Trailing The Industry But Its Shares Aren't

It's not a stretch to say that Power and Water Utility Company for Jubail and Yanbu's (TADAWUL:2083) price-to-sales (or "P/S") ratio of 1.6x right now seems quite "middle-of-the-road" for companies in the Integrated Utilities industry in Saudi Arabia, where the median P/S ratio is around 1.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for Power and Water Utility Company for Jubail and Yanbu

What Does Power and Water Utility Company for Jubail and Yanbu's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Power and Water Utility Company for Jubail and Yanbu has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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Is There Some Revenue Growth Forecasted For Power and Water Utility Company for Jubail and Yanbu?

Power and Water Utility Company for Jubail and Yanbu's 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.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Regardless, revenue has managed to lift by a handy 5.6% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the one analyst covering the company suggest revenue growth is heading into negative territory, declining 0.1% over the next year. Meanwhile, the broader industry is forecast to expand by 3.6%, which paints a poor picture.

With this in consideration, we think it doesn't make sense that Power and Water Utility Company for Jubail and Yanbu's P/S is closely matching its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What Does Power and Water Utility Company for Jubail and Yanbu's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our check of Power and Water Utility Company for Jubail and Yanbu's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Power and Water Utility Company for Jubail and Yanbu (2 are concerning) you should be aware of.

If these risks are making you reconsider your opinion on Power and Water Utility Company for Jubail and Yanbu, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.