It's Down 29% But Calumet, Inc. (NASDAQ:CLMT) Could Be Riskier Than It Looks

Unfortunately for some shareholders, the Calumet, Inc. (NASDAQ:CLMT) share price has dived 29% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 38% share price drop.

After such a large drop in price, Calumet's price-to-sales (or "P/S") ratio of 0.2x might make it look like a buy right now compared to the Oil and Gas industry in the United States, where around half of the companies have P/S ratios above 1.5x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Our free stock report includes 2 warning signs investors should be aware of before investing in Calumet. Read for free now.

View our latest analysis for Calumet

What Does Calumet's Recent Performance Look Like?

There hasn't been much to differentiate Calumet's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Calumet'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?

Calumet's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

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 33% 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.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 4.1% per year over the next three years. That's shaping up to be similar to the 5.7% per year growth forecast for the broader industry.

With this information, we find it odd that Calumet is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

Calumet's recently weak share price has pulled its P/S back below other Oil and Gas companies. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It looks to us like the P/S figures for Calumet remain low despite growth that is expected to be in line with other companies in the 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. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Calumet (1 makes us a bit uncomfortable!) that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.