There's No Escaping Cleveland-Cliffs Inc.'s (NYSE:CLF) Muted Revenues

With a price-to-sales (or "P/S") ratio of 0.3x 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 1.3x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Cleveland-Cliffs

How Cleveland-Cliffs Has Been Performing

Cleveland-Cliffs could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. 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.

Keen to find out how analysts think Cleveland-Cliffs' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Cleveland-Cliffs' Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.9%. Regardless, revenue has managed to lift by a handy 15% 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 1.8% during the coming year according to the ten analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 14%, which is noticeably more attractive.

In light of this, it's understandable that Cleveland-Cliffs' 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.

What We Can Learn From Cleveland-Cliffs' P/S?

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 we suspected, our examination of Cleveland-Cliffs' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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.

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

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.