There's No Escaping Tronox Holdings plc's (NYSE:TROX) Muted Revenues Despite A 26% Share Price Rise

Those holding Tronox Holdings plc (NYSE:TROX) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 69% share price decline over the last year.

In spite of the firm bounce in price, considering around half the companies operating in the United States' Chemicals industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Tronox Holdings as an solid investment opportunity with its 0.2x 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.

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See our latest analysis for Tronox Holdings

What Does Tronox Holdings' Recent Performance Look Like?

Recent revenue growth for Tronox Holdings has been in line with the industry. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Tronox Holdings.

How Is Tronox Holdings' Revenue Growth Trending?

Tronox Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. This isn't what shareholders were looking for as it means they've been left with a 20% decline in revenue over the last three years in total. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 1.7% as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 11%, which is noticeably more attractive.

With this in consideration, its clear as to why Tronox Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Tronox Holdings' P/S Mean For Investors?

Tronox Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of Tronox Holdings' 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Tronox Holdings is showing 3 warning signs in our investment analysis, and 2 of those make us uncomfortable.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.