Tronox Holdings plc (NYSE:TROX) shares have continued their recent momentum with a 47% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 39% over that time.

Although its price has surged higher, it would still be understandable if you think Tronox Holdings is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in the United States' Chemicals industry have P/S ratios above 1.2x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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

While the industry has experienced revenue growth lately, Tronox Holdings' revenue has gone into reverse gear, which is not great. 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.

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

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 a frustrating 7.8% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 23% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 2.8% over the next year. That's shaping up to be materially lower than the 7.0% growth forecast for the broader industry.

With this in consideration, its clear as to why Tronox Holdings' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Tronox Holdings' P/S

The latest share price surge wasn't enough to lift Tronox Holdings' P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Tronox Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Tronox Holdings (at least 2 which are potentially serious), and understanding them should be part of your investment process.

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.

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.