It's Down 27% But The Chemours Company (NYSE:CC) Could Be Riskier Than It Looks

To the annoyance of some shareholders, The Chemours Company (NYSE:CC) shares are down a considerable 27% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 31% share price drop.

Although its price has dipped substantially, given about half the companies operating in the United States' Chemicals industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Chemours as an attractive investment with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Chemours

What Does Chemours' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Chemours' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still 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.

Want the full picture on analyst estimates for the company? Then our free report on Chemours will help you uncover what's on the horizon.

How Is Chemours' Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 4.9% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 8.9% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 3.8% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.7% per annum, which is not materially different.

In light of this, it's peculiar that Chemours' 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 Bottom Line On Chemours' P/S

Chemours' P/S has taken a dip along with its share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've seen that Chemours 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's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Chemours, and understanding them should be part of your investment process.

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.