Quaker Chemical Corporation's (NYSE:KWR) P/S Still Appears To Be Reasonable

There wouldn't be many who think Quaker Chemical Corporation's (NYSE:KWR) price-to-sales (or "P/S") ratio of 1.6x is worth a mention when the median P/S for the Chemicals industry in the United States is similar at about 1.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Quaker Chemical

What Does Quaker Chemical's P/S Mean For Shareholders?

Quaker Chemical's negative revenue growth of late has neither been better nor worse than most other companies. Perhaps the market is expecting future revenue performance to continue matching the industry, which has kept the P/S in line with expectations. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.

Want the full picture on analyst estimates for the company? Then our free report on Quaker Chemical will help you uncover what's on the horizon.

How Is Quaker Chemical's Revenue Growth Trending?

Quaker Chemical's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 4.1% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 17% in total. 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 2.4% during the coming year according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 3.6%, which is not materially different.

With this information, we can see why Quaker Chemical is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Quaker Chemical's P/S

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.

Our look at Quaker Chemical's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Quaker Chemical with six simple checks.

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.