Investors Continue Waiting On Sidelines For Huntsman Corporation (NYSE:HUN)

When close to half the companies operating in the Chemicals industry in the United States have price-to-sales ratios (or "P/S") above 1.3x, you may consider Huntsman Corporation (NYSE:HUN) as an attractive investment with its 0.5x 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 Huntsman

How Huntsman Has Been Performing

With revenue that's retreating more than the industry's average of late, Huntsman has been very sluggish. It seems that many are expecting the dismal revenue performance to persist, which has repressed the P/S. You'd much rather the company improve its revenue performance if you still believe in the business. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to 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 Huntsman will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Huntsman would need to produce sluggish growth that's trailing 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 5.8%. The last three years don't look nice either as the company has shrunk revenue by 17% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 4.4% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.6% per year, which is not materially different.

In light of this, it's peculiar that Huntsman's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Huntsman's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Huntsman (2 are concerning!) that you need to be mindful of.

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