The Market Doesn't Like What It Sees From Celanese Corporation's (NYSE:CE) Revenues Yet As Shares Tumble 29%

The Celanese Corporation (NYSE:CE) share price has fared very poorly over the last month, falling by a substantial 29%. For any long-term shareholders, the last month ends a year to forget by locking in a 65% share price decline.

Since its price has dipped substantially, when close to half the companies operating in the United States' Chemicals industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider Celanese as an enticing stock to check out with its 0.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Celanese

What Does Celanese's P/S Mean For Shareholders?

Celanese hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. 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.

Retrospectively, the last year delivered a frustrating 6.0% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 20% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 1.1% per annum during the coming three years according to the analysts following the company. With the industry predicted to deliver 4.6% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Celanese's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

The southerly movements of Celanese's shares means its P/S is now sitting at a pretty low level. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Celanese maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

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 concerning.

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