Etihad Atheeb Telecommunication Company (TADAWUL:7040) Stocks Pounded By 25% But Not Lagging Industry On Growth Or Pricing

Etihad Atheeb Telecommunication Company (TADAWUL:7040) shareholders won’t be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period’s positive performance. Indeed, the recent drop has reduced its annual gain to a relatively sedate 8.4% over the last twelve months.

In spite of the heavy fall in price, given close to half the companies operating in Saudi Arabia’s Telecom industry have price-to-sales ratios (or “P/S”) below 1.7x, you may still consider Etihad Atheeb Telecommunication as a stock to potentially avoid with its 3.4x 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 as high as it is.

See our latest analysis for Etihad Atheeb Telecommunication

How Etihad Atheeb Telecommunication Has Been Performing

With revenue growth that’s exceedingly strong of late, Etihad Atheeb Telecommunication has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

We don’t have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Etihad Atheeb Telecommunication’s earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The High P/S?

There’s an inherent assumption that a company should outperform the industry for P/S ratios like Etihad Atheeb Telecommunication’s to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 55% last year. Pleasingly, revenue has also lifted 215% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry’s one-year growth forecast of 4.6% shows it’s noticeably more attractive.

With this in consideration, it’s not hard to understand why Etihad Atheeb Telecommunication’s P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On Etihad Atheeb Telecommunication’s P/S

There’s still some elevation in Etihad Atheeb Telecommunication’s P/S, even if the same can’t be said for its share price recently. While the price-to-sales ratio shouldn’t be the defining factor in whether you buy a stock or not, it’s quite a capable barometer of revenue expectations.

We’ve established that Etihad Atheeb Telecommunication maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren’t under threat. If recent medium-term revenue trends continue, it’s hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we’ve spotted 2 warning signs for Etihad Atheeb Telecommunication (of which 1 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.

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