Mativ Holdings, Inc.'s (NYSE:MATV) Shares Bounce 29% But Its Business Still Trails The Industry

Mativ Holdings, Inc. (NYSE:MATV) shares have had a really impressive month, gaining 29% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.3% in the last twelve months.

Although its price has surged higher, considering around half the companies operating in the United States' Chemicals industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Mativ Holdings as an solid investment opportunity with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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See our latest analysis for Mativ Holdings

How Has Mativ Holdings Performed Recently?

Recent revenue growth for Mativ Holdings has been in line with the industry. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. Those who are bullish on Mativ Holdings will be hoping that this isn't the case.

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Do Revenue Forecasts Match The Low P/S Ratio?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. However, a few strong years before that means that it was still able to grow revenue by an impressive 32% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 1.9% each year over the next three years. With the industry predicted to deliver 12% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Mativ Holdings' 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 Final Word

Despite Mativ Holdings' share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Mativ Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with Mativ Holdings.

If you're unsure about the strength of Mativ Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.