Revenues Working Against Soitec SA's (EPA:SOI) Share Price Following 43% Dive

Soitec SA (EPA:SOI) shareholders that were waiting for something to happen have been dealt a blow with a 43% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 65% loss during that time.

In spite of the heavy fall in price, it would still be understandable if you think Soitec is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 1.1x, considering almost half the companies in France's Semiconductor industry have P/S ratios above 1.6x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Soitec

What Does Soitec's Recent Performance Look Like?

With only a limited decrease in revenue compared to most other companies of late, Soitec has been doing relatively well. It might be that many expect the comparatively superior revenue performance to degrade substantially, which has repressed the P/S. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. But at the very least, you'd be hoping that revenue doesn't fall off a cliff completely if your plan is to pick up some stock while it's out of favour.

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

How Is Soitec's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Soitec'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 14%. As a result, revenue from three years ago have also fallen 18% 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 analysts following the company. That's shaping up to be materially lower than the 10% per year growth forecast for the broader industry.

In light of this, it's understandable that Soitec's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Soitec's P/S has taken a dip along with its share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As expected, our analysis of Soitec's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Soitec (including 1 which shouldn't be ignored).

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).

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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.