Market Might Still Lack Some Conviction On Taita Chemical Company, Limited (TWSE:1309) Even After 31% Share Price Boost

Taita Chemical Company, Limited (TWSE:1309) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 24% is also fairly reasonable.

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 2x 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.

View our latest analysis for Taita Chemical Company

How Taita Chemical Company Has Been Performing

With revenue growth that's superior to most other companies of late, Taita Chemical Company has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Taita Chemical Company.

Is There Any Revenue Growth Forecasted For Taita Chemical Company?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 6.9% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 12% overall drop in revenue. 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 7.7% as estimated by the one analyst watching the company. That's shaping up to be similar to the 9.6% growth forecast for the broader industry.

In light of this, it's peculiar that Taita Chemical Company's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

The latest share price surge wasn't enough to lift Taita Chemical Company's P/S close to the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Taita Chemical Company's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Many other vital risk factors can be found on the company's balance sheet. 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.