Not Many Are Piling Into The Chemours Company (NYSE:CC) Just Yet

When close to half the companies operating in the Chemicals industry in the United States have price-to-sales ratios (or "P/S") above 1.4x, you may consider The Chemours Company (NYSE:CC) as an attractive investment with its 0.6x P/S ratio. 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 Chemours

How Chemours Has Been Performing

Chemours has been struggling lately as its revenue has declined faster than most other companies. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 4.2%. As a result, revenue from three years ago have also fallen 5.9% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 3.9% as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 2.9%, which is not materially different.

With this information, we find it odd that Chemours is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Having said that, be aware Chemours is showing 3 warning signs in our investment analysis, and 2 of those are a bit concerning.

If these risks are making you reconsider your opinion on Chemours, 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.