Investors Continue Waiting On Sidelines For Cleveland-Cliffs Inc. (NYSE:CLF)

With a price-to-sales (or "P/S") ratio of 0.2x Cleveland-Cliffs Inc. (NYSE:CLF) may be sending bullish signals at the moment, given that almost half of all the Metals and Mining companies in the United States have P/S ratios greater than 1.5x and even P/S higher than 7x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Cleveland-Cliffs

How Has Cleveland-Cliffs Performed Recently?

Cleveland-Cliffs could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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How Is Cleveland-Cliffs' Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. This means it has also seen a slide in revenue over the longer-term as revenue is down 6.2% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 5.8% per year as estimated by the ten analysts watching the company. That's shaping up to be similar to the 5.9% each year growth forecast for the broader industry.

With this information, we find it odd that Cleveland-Cliffs is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

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 Cleveland-Cliffs currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 1 warning sign for Cleveland-Cliffs that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.