Natural Gas Distribution Company (TADAWUL:9516) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 19% in that time.
Although its price has dipped substantially, given close to half the companies in Saudi Arabia have price-to-earnings ratios (or “P/E’s”) below 20x, you may still consider Natural Gas Distribution as a stock to avoid entirely with its 47.2x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it’s justified.
For example, consider that Natural Gas Distribution’s financial performance has been pretty ordinary lately as earnings growth is non-existent. One possibility is that the P/E is high because investors think the benign earnings growth will improve to outperform the broader market in the near future. You’d really hope so, otherwise you’re paying a pretty hefty price for no particular reason.
See our latest analysis for Natural Gas Distribution
SASE:9516 Price to Earnings Ratio vs Industry July 30th 2025 Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Natural Gas Distribution will help you shine a light on its historical performance. Does Growth Match The High P/E?
The only time you’d be truly comfortable seeing a P/E as steep as Natural Gas Distribution’s is when the company’s growth is on track to outshine the market decidedly.
Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow EPS by an impressive 52% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.
This is in contrast to the rest of the market, which is expected to grow by 12% over the next year, materially lower than the company’s recent medium-term annualised growth rates.
In light of this, it’s understandable that Natural Gas Distribution’s P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.
What We Can Learn From Natural Gas Distribution’s P/E?
Natural Gas Distribution’s shares may have retreated, but its P/E is still flying high. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
As we suspected, our examination of Natural Gas Distribution revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren’t under threat. If recent medium-term earnings trends continue, it’s hard to see the share price falling strongly in the near future under these circumstances.
There are also other vital risk factors to consider and we’ve discovered 3 warning signs for Natural Gas Distribution (2 are significant!) that you should be aware of before investing here.
If these risks are making you reconsider your opinion on Natural Gas Distribution, explore our interactive list of high quality stocks to get an idea of what else is out there.
Discover if Natural Gas Distribution might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.