National Building and Marketing Co. (TADAWUL:9510) stock soars 27%, earnings speak for themselves

National Building and Marketing Company (TADAWUL:9510) The stock had a very successful month, rising 27% after a volatile period earlier. Looking further back, despite the strong past 30 days, the 13% gain over the past 12 months isn’t too bad.

With prices soaring, we think National Building & Marketing is a stock to avoid considering its price-to-sales (“P/S”) ratio of 5.5x and nearly half of the companies in the country. It may not be unreasonable. Saudi Arabia’s trade and distribution industry has a P/S multiple of less than 2x. However, there may be a reason why the P/S is so high, and further research is needed to determine if it’s justified.

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What does National Building and Marketing’s P/S mean for shareholders?

As an example, National Building and Marketing’s earnings have deteriorated over the past year, which is not ideal at all. Perhaps the market believes that the company can outperform other companies in the industry in the near future, which is why it maintains a high P/S ratio. However, if this is not the case, investors may find out that they are paying too much for the stock.

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Are revenue projections consistent with high returns?

There is an inherent assumption that for a profit and loss ratio like National Building and Marketing’s to be considered reasonable, a company must significantly outperform its industry.

When we reviewed last year’s financials, we were disappointed to see that our revenue declined by 7.6%. His most recent three years have seen an impressive increase in overall earnings, in stark contrast to the previous 12 months. So while the company has had a great performance so far, it’s somewhat concerning to see revenue growth fall so drastically.

When compared to the industry’s one-year growth forecast of 3.5%, the latest medium-term earnings trajectory is significantly attractive.

This information helps explain why National Building and Marketing is trading at a very high P/S compared to its industry. Most investors expect this strong growth to continue and appear willing to pay more for the stock.

National Building and Marketing P/S Conclusion

National Building and Marketing Co.’s profits and losses also skyrocketed due to the significant rise in stock prices. It can be argued that the price-to-sales ratio is primarily used to gauge current investor sentiment and future expectations, rather than as a valuation tool.

It’s no surprise that National Building and Marketing can support its high P/S, considering the strong revenue growth the company has experienced over the past three years has outpaced current industry expectations. At the moment, shareholders are happy with the P/S as they are confident that earnings are not threatened. Unless the recent medium-term situation changes, stock prices will continue to be strongly supported.

That being said, please be careful Nation Building and Marketing Shows 4 Red Flags Two of them are a bit jarring in our investment analysis.

If you’re interested in strong companies that are profitable, then you might want to check this out. free A list of interesting companies that trade at low P/Es (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and the articles are not intended as financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.