Lotte Chemical Titan Holding Berhad's (KLSE:LCTITAN) Business And Shares Still Trailing The Industry

When you see that almost half of the companies in the Chemicals industry in Malaysia have price-to-sales ratios (or "P/S") above 1.6x, Lotte Chemical Titan Holding Berhad (KLSE:LCTITAN) looks to be giving off some buy signals with its 0.4x 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 limited.

Check out our latest analysis for Lotte Chemical Titan Holding Berhad

What Does Lotte Chemical Titan Holding Berhad's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, Lotte Chemical Titan Holding Berhad has been very sluggish. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Lotte Chemical Titan Holding Berhad will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Lotte Chemical Titan Holding Berhad?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Lotte Chemical Titan Holding Berhad's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. As a result, revenue from three years ago have also fallen 2.7% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 2.9% as estimated by the four analysts watching the company. With the industry predicted to deliver 7.2% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Lotte Chemical Titan Holding Berhad is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Lotte Chemical Titan Holding Berhad's P/S

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Lotte Chemical Titan Holding Berhad's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Lotte Chemical Titan Holding Berhad that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.