ams-OSRAM AG (VTX:AMS) Stock Catapults 55% Though Its Price And Business Still Lag The Industry

ams-OSRAM AG (VTX:AMS) shareholders are no doubt pleased to see that the share price has bounced 55% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 67% share price decline over the last year.

Even after such a large jump in price, ams-OSRAM's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a buy right now compared to the Semiconductor industry in Switzerland, where around half of the companies have P/S ratios above 1.7x 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.

View our latest analysis for ams-OSRAM

What Does ams-OSRAM's P/S Mean For Shareholders?

ams-OSRAM hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For ams-OSRAM?

In order to justify its P/S ratio, ams-OSRAM 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 21%. Still, the latest three year period has seen an excellent 44% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 4.0% each year as estimated by the eight analysts watching the company. With the industry predicted to deliver 11% growth per annum, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why ams-OSRAM's 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 ams-OSRAM's P/S Mean For Investors?

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

As expected, our analysis of ams-OSRAM's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. It's hard to see the share price rising strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with ams-OSRAM, and understanding 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.

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