Improved Revenues Required Before ams-OSRAM AG (VTX:AMS) Stock's 28% Jump Looks Justified

ams-OSRAM AG (VTX:AMS) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 45% over that time.

In spite of the firm bounce in price, ams-OSRAM may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Semiconductor industry in Switzerland have P/S ratios greater than 2x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for ams-OSRAM

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

ams-OSRAM could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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.

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Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, ams-OSRAM would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.1%. As a result, revenue from three years ago have also fallen 32% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 5.0% per annum during the coming three years according to the ten analysts following the company. With the industry predicted to deliver 10% growth each year, 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.

The Final Word

ams-OSRAM's stock price has surged recently, but its but its P/S still remains modest. 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 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 1 warning sign for ams-OSRAM that we have uncovered.

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.