The Chemours Company (NYSE:CC) Held Back By Insufficient Growth Even After Shares Climb 33%

The Chemours Company (NYSE:CC) shares have continued their recent momentum with a 33% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.

Even after such a large jump in price, it would still be understandable if you think Chemours is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in the United States' Chemicals industry have P/S ratios above 1.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for Chemours

How Chemours Has Been Performing

Recent revenue growth for Chemours has been in line with the industry. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. Those who are bullish on Chemours will be hoping that this isn't the case.

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Do Revenue Forecasts Match The Low P/S Ratio?

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 virtually the same number to the company's top line as the year before. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 16% drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 3.2% over the next year. With the industry predicted to deliver 11% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Chemours is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Chemours' P/S Mean For Investors?

Despite Chemours' share price climbing recently, its P/S still lags most other 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.

As we suspected, our examination of Chemours' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Chemours you should know about.

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.