ams-OSRAM AG (VTX:AMS) Held Back By Insufficient Growth Even After Shares Climb 29%

The ams-OSRAM AG (VTX:AMS) share price has done very well over the last month, posting an excellent gain of 29%. But the last month did very little to improve the 64% share price decline over the last year.

Even after such a large jump in price, ams-OSRAM may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Semiconductor industry in Switzerland have P/S ratios greater than 1.9x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for ams-OSRAM

What Does ams-OSRAM's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, ams-OSRAM has been very sluggish. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is ams-OSRAM's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as ams-OSRAM's is when the company's growth is on track to lag 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 10%. As a result, revenue from three years ago have also fallen 34% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 5.2% each year as estimated by the nine analysts watching the company. That's shaping up to be materially lower than the 13% per annum growth forecast for the broader industry.

With this information, we can see why ams-OSRAM is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On ams-OSRAM's P/S

The latest share price surge wasn't enough to lift ams-OSRAM's P/S close to the industry median. 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.

We've established that ams-OSRAM 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with ams-OSRAM.

If these risks are making you reconsider your opinion on ams-OSRAM, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.