There Is A Reason CI Systems (Israel) Ltd.'s (TLV:CISY) Price Is Undemanding

CI Systems (Israel) Ltd.'s (TLV:CISY) price-to-sales (or "P/S") ratio of 1.5x might make it look like a buy right now compared to the Semiconductor industry in Israel, where around half of the companies have P/S ratios above 3.1x and even P/S above 8x 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.

See our latest analysis for CI Systems (Israel)

What Does CI Systems (Israel)'s P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at CI Systems (Israel) over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on CI Systems (Israel) will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for CI Systems (Israel), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For CI Systems (Israel)?

In order to justify its P/S ratio, CI Systems (Israel) would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 29% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

This is in contrast to the rest of the industry, which is expected to grow by 7,581% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why CI Systems (Israel)'s P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From CI Systems (Israel)'s P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of CI Systems (Israel) revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 3 warning signs we've spotted with CI Systems (Israel).

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.