Despite an already strong run, Tredegar Corporation (NYSE:TG) shares have been powering on, with a gain of 28% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

In spite of the firm bounce in price, Tredegar's price-to-sales (or "P/S") ratio of 0.3x might still make it look like a buy right now compared to the Metals and Mining industry in the United States, where around half of the companies have P/S ratios above 1.3x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does Tredegar's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Tredegar over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. If you 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Tredegar's earnings, revenue and cash flow.

How Is Tredegar's Revenue Growth Trending?

In order to justify its P/S ratio, Tredegar 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 25%. As a result, revenue from three years ago have also fallen 6.7% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 8.4% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that Tredegar's P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Tredegar's P/S Mean For Investors?

Tredegar's stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's no surprise that Tredegar maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Tredegar (2 are significant!) that you should be aware of before investing here.

If you're unsure about the strength of Tredegar's 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.