Positive Sentiment Still Eludes Camlin Fine Sciences Limited (NSE:CAMLINFINE) Following 26% Share Price Slump

Unfortunately for some shareholders, the Camlin Fine Sciences Limited (NSE:CAMLINFINE) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 31% in that time.

In spite of the heavy fall in price, it's still not a stretch to say that Camlin Fine Sciences' price-to-sales (or "P/S") ratio of 0.9x right now seems quite "middle-of-the-road" compared to the Chemicals industry in India, where the median P/S ratio is around 1.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Camlin Fine Sciences

What Does Camlin Fine Sciences' P/S Mean For Shareholders?

Camlin Fine Sciences' negative revenue growth of late has neither been better nor worse than most other companies. The P/S ratio is probably moderate because investors think the company's revenue trend will continue to follow the rest of the industry. You'd much rather the company improve its revenue if you still believe in the business. At the very least, you'd be hoping that revenue doesn't accelerate downwards if your plan is to pick up some stock while it's not in favour.

Keen to find out how analysts think Camlin Fine Sciences' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Camlin Fine Sciences' to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Although pleasingly revenue has lifted 42% in aggregate from three years ago, notwithstanding the last 12 months. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Turning to the outlook, the next year should generate growth of 25% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 12%, which is noticeably less attractive.

With this information, we find it interesting that Camlin Fine Sciences is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Camlin Fine Sciences looks to be in line with the rest of the Chemicals industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Camlin Fine Sciences currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Camlin Fine Sciences (1 can't be ignored!) that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.