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4265

Governance: C

CHERRY

Cherry Trading Co.

24.72 SAR / Share

As of: May 28, 2026

10.0x P/E Ratio Trailing 12 Months

1.2x P/B Ratio Price to Book Value

— Dividend Yield Annual Dividend / Share

741.60M SAR Market Cap Total Valuation

2.10 Beta Systematic Risk Index

13.1% Net Margin Net Profit / Revenue

The Story

Cherry Trading Company is a highly leveraged, capital-intensive vehicle leasing and sales business in Saudi Arabia that generates strong operating margins but requires massive capital reinvestment to sustain its expanding fleet.

Source: Q1 2026 (2026-05-11)

Value Creation +2.5% Excess Return on Capital (Spread between ROIC/ROE and Cost of Capital)

Cash Flow Payback — Estimated years of operating cash flows required to cover Enterprise Value

Performance & Distributions

Dividend Yield Trailing annual dividends paid relative to share price

—

Sustainable Growth Rate Rate at which company can grow internally using reinvested profits

+13.1%

Payout Ratio Percent of net profits distributed as dividends

—

Net Margin Net profit margin generated from total operational revenue

13.1%

ROIC Return on Invested Capital

11.7%

Market Pricing Multiples

P/E Ratio Market value compared to corporate net earnings

10.0x

P/B Ratio Market capitalization compared to corporate book value

1.2x

EV / EBITDA Operating multiple reflecting core operational leverage

5.3x

EV / SALES Asset pricing multiple relative to total topline revenue

3.0x

Growth Story

Cherry's growth trajectory is characterized by steady top-line expansion, with revenue rising from 454,655,643 SAR in FY 2024 to 517,889,778 SAR in FY 2025, and reaching 564,398,246 SAR over the trailing twelve months (TTM). This expansion is driven by a massive reinvestment strategy, as evidenced by a five-year average reinvestment rate of 111.89%. By channeling more than its entire operating profit back into the business—primarily through fleet additions of motor vehicles—the company supports a sustainable growth rate of 13.11%. This aggressive capital deployment ensures that its core long-term leasing segment, which remains the primary growth engine, has the capacity to meet expanding demand in the Saudi market.

Profitability Dynamics

Cherry demonstrates solid profitability, boasting a TTM operating margin of 30.47% and a net profit margin of 13.10%, translating to a NOPAT of 168,419,367 SAR. The company is a consistent value creator, with a five-year average Return on Invested Capital (ROIC) of 11.72% that comfortably exceeds its Weighted Average Cost of Capital (WACC) of 9.26%, yielding a positive spread of 2.46%. However, this profitability is highly capital-intensive. The company's TTM capital expenditures of 471,132,068 SAR outpace its operating cash generation, leading to negative or highly volatile free cash flows to the firm (FCFF). This dynamic reflects a business model where accounting profits are robust, but actual cash is continuously recycled into the depreciating fleet to maintain competitive positioning.

Risk & Capital Structure

Beta Systematic market risk indicator relative to the TASI index

2.10

Cost of Equity Minimum required rate of return demanded by shareholders

13.6%

WACC Weighted average cost of total debt and equity funding

9.3%

Debt-to-Equity Ratio Proportion of corporate funding financed by debt creditors

134.6%

Risk Factors

The primary risk facing Cherry lies in its aggressive capital structure and high leverage. The company's net debt-to-equity ratio stood at a substantial 1.98 as of March 31, 2026, with total debt reaching 998,474,430 SAR against cash reserves of only 36,647,817 SAR. This heavy reliance on debt is reflected in a high relevered beta of 2.10, indicating significant systematic risk and sensitivity to macroeconomic shifts. Furthermore, the company's cost of equity is elevated at 13.63%, while its after-tax cost of debt is 6.02%. Operational risks are also concentrated, with the five largest customers accounting for 28% of outstanding trade receivables as of March 31, 2026, exposing Cherry to potential credit shocks if a major counterparty defaults.

Governance Disclosures

Rating: C

We track 8 key governance and oversight matters for this company in our database.

Significance: 3/10 Info Asymmetry

Services Received from Entities Under Common Control

The Company received services from entities under common control during the three-month period ended 31 March 2026, including SAR 381,290 from H-10 Logistics Services and SAR 151,160 from Elegant Vehicle Carwash Services Company.

Mitigating Factors: Transactions with related parties were conducted in accordance with approved contractual terms.

Significance: 4/10 Propping

Expense Absorption and Transactions with Parent Entity

During the three-month period ended 31 March 2026, the parent company, Saudi Edarah Holding Company, paid expenses of SAR 2,831,589 on behalf of the Company, while the Company paid expenses of SAR 28,428 on behalf of the parent. Repayments of SAR 3,075,525 were made, leaving a due to related party balance of SAR 1,418,110 as of 31 March 2026.

Mitigating Factors: Transactions with related parties were conducted in accordance with approved contractual terms. Outstanding balances at the end of the period are unsecured, interest-free and settled in cash.

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In-Depth Analysis