Celanese Corporation's (NYSE:CE) Price Is Right But Growth Is Lacking After Shares Rocket 27%

Celanese Corporation (NYSE:CE) shares have had a really impressive month, gaining 27% after a shaky period beforehand. But the last month did very little to improve the 64% share price decline over the last year.

In spite of the firm bounce in price, 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 Celanese as an attractive investment with its 0.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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See our latest analysis for Celanese

What Does Celanese's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Celanese's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. 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 Celanese will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

Celanese'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.

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 6.0%. Regardless, revenue has managed to lift by a handy 8.4% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 1.6% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 26% per year, which is noticeably more attractive.

In light of this, it's understandable that Celanese's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

The latest share price surge wasn't enough to lift Celanese's P/S close to the industry median. 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.

As expected, our analysis of Celanese's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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.

You should always think about risks. Case in point, we've spotted 2 warning signs for Celanese you should be aware of, and 1 of them is significant.

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.