Many Still Looking Away From Calumet Specialty Products Partners, L.P. (NASDAQ:CLMT)

With a price-to-sales (or "P/S") ratio of 0.3x Calumet Specialty Products Partners, L.P. (NASDAQ:CLMT) may be sending bullish signals at the moment, given that almost half of all the Oil and Gas companies in the United States have P/S ratios greater than 2x and even P/S higher than 4x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Calumet Specialty Products Partners

How Has Calumet Specialty Products Partners Performed Recently?

Recent times have been more advantageous for Calumet Specialty Products Partners as its revenue hasn't fallen as much as the rest of the industry. One possibility is that the P/S ratio is low because investors think this relatively better revenue performance might be about to deteriorate significantly. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. But at the very least, you'd be hoping that revenue doesn't fall off a cliff completely if your plan is to 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 Calumet Specialty Products Partners.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Calumet Specialty Products Partners' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. Even so, admirably revenue has lifted 91% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 1.0% each year as estimated by the four analysts watching the company. That's shaping up to be similar to the 2.6% per year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Calumet Specialty Products Partners' P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

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.

We've seen that Calumet Specialty Products Partners currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

It is also worth noting that we have found 3 warning signs for Calumet Specialty Products Partners that you need to take into consideration.

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.