Investors Still Aren't Entirely Convinced By Taita Chemical Company, Limited's (TWSE:1309) Revenues Despite 29% Price Jump

The Taita Chemical Company, Limited (TWSE:1309) share price has done very well over the last month, posting an excellent gain of 29%. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

In spite of the firm bounce in price, Taita Chemical Company may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Chemicals industry in Taiwan have P/S ratios greater than 1.9x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Taita Chemical Company

How Taita Chemical Company Has Been Performing

Recent times haven't been great for Taita Chemical Company as its revenue has been falling quicker than most other companies. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. You'd much rather the company improve its revenue performance if you still believe in the business. 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.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Taita Chemical Company would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.9%. The last three years don't look nice either as the company has shrunk revenue by 9.7% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 16% over the next year. That's shaping up to be materially higher than the 7.4% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Taita Chemical Company's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Taita Chemical Company's P/S Mean For Investors?

Taita Chemical Company's stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A look at Taita Chemical Company's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Taita Chemical Company with six simple checks.

If these risks are making you reconsider your opinion on Taita Chemical Company, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com