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    Valhi, Inc.'s (NYSE:VHI) Share Price Boosted 28% But Its Business Prospects Need A Lift Too

    Simply Wall St·07/03/2025 10:09:02
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    Valhi, Inc. (NYSE:VHI) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Notwithstanding the latest gain, the annual share price return of 6.7% isn't as impressive.

    In spite of the firm bounce in price, given about half the companies operating in the United States' Chemicals industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider Valhi as an attractive investment 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 Valhi

    ps-multiple-vs-industry
    NYSE:VHI Price to Sales Ratio vs Industry July 3rd 2025

    How Has Valhi Performed Recently?

    Revenue has risen firmly for Valhi recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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.

    Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Valhi will help you shine a light on its historical performance.

    What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

    Taking a look back first, we see that the company managed to grow revenues by a handy 7.8% last year. Still, lamentably revenue has fallen 13% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

    Comparing that to the industry, which is predicted to deliver 14% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

    In light of this, it's understandable that Valhi'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.

    The Final Word

    Despite Valhi's share price climbing recently, its P/S still lags most other companies. 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.

    It's no surprise that Valhi 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.

    Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Valhi (1 is a bit unpleasant) you should be aware of.

    If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).