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The shares of Anghami Inc. (NASDAQ:ANGH) fell 45%, but getting in on the cheap can be difficult anyway

The Anghami Inc. (NASDAQ:ANGH) The stock price is down 45% in the last 30 days, giving back much of the gains the stock has made lately. The decline over the past thirty days has capped off a tough year for shareholders, with the share price down 25% in that time.

Although the price has dropped significantly, there still aren’t many who think Anghami’s price-to-sales ratio (or ‘P/S’) of 1.8x is worth mentioning when the average P/S in the entertainment industry in the United States is worth mentioning. industry compares at about 1.4x. Although it is not wise to simply ignore the P/S without explanation as investors may be ignoring a clear opportunity or a costly mistake.

Check out our latest analysis for Anghami

ps-multiple-vs-industry
NasdaqGM:ANGH Price to Sales Ratio vs. industry May 1, 2024

How Anghami has performed

For example, consider that Anghami’s financial performance has been poor lately as revenues have fallen. It may be that many expect the company to put its disappointing sales performance behind it in the coming period, which is why the price-earnings ratio has not fallen. If not, existing shareholders may be somewhat nervous about the viability of the share price.

Do you want a complete picture of the company’s income, turnover and cash flow? Then our free report on Anghami will help you shed light on its historical performance.

Is there any revenue growth expected for Anghami?

The only time you’ll feel comfortable seeing a P/S like Anghami’s is when the company’s growth is closely tracking the industry.

Retrospectively, the past year saw a frustrating 15% decline in the company’s revenue. Yet there has been an excellent overall sales increase of 36% over the past three years, despite unsatisfactory short-term performance. So we can start by confirming that overall the company has grown its revenue very well over that period, even if it has had some hiccups along the way.

Comparing that to the industry, which is expected to grow 11% over the next twelve months, the company’s momentum is very similar, based on recent annualized revenue results over the medium term.

With this information, we can see why Anghami is trading at a fairly similar P/S to the industry. It appears that most investors expect average growth rates to continue in the future and are only willing to pay a modest amount for the stock.

The last word

Now that the share price has fallen off a cliff, the price/earnings ratio for Anghami appears to be in line with the rest of the entertainment industry. We would say that the price-to-sales ratio is not primarily a valuation tool, but rather a tool to gauge current investor sentiment and future expectations.

As we’ve seen, Anghami’s three-year revenue trends appear to be contributing to its price-to-earnings ratio, as they appear similar to current industry expectations. With past revenue trends keeping pace with the current industry outlook, it’s hard to justify the company’s P/S ratio deviating much from where it is today. Given current conditions, it seems unlikely that the share price will see any significant movement in either direction in the near future if recent revenue trends continue over the medium term.

Remember that there may be other risks. For example, we identified ourselves 6 warning signs for Anghami (5 are a bit concerning) that you should be aware of.

If strong companies that make profits interest you, then you’ll definitely want to check this out free list of interesting companies that trade at a low price/earnings (but have proven that they can grow their profits).

Valuation is complex, but we help make it simple.

Invent or Anghami may be over or undervalued if you look at our comprehensive analysis, including fair value estimates, risks and cautions, dividends, insider transactions and financial health.

View the Free Analysis

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It 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 you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.