Investors Still Waiting For A Pull Back In Sivers Semiconductors AB (publ) (STO:SIVE)

When close to half the companies in the Semiconductor industry in Sweden have price-to-sales ratios (or "P/S") below 2.2x, you may consider Sivers Semiconductors AB (publ) (STO:SIVE) as a stock to potentially avoid with its 3.4x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Sivers Semiconductors

What Does Sivers Semiconductors' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Sivers Semiconductors has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Sivers Semiconductors would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 21%. Pleasingly, revenue has also lifted 99% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 11% over the next year. With the industry only predicted to deliver 4.8%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Sivers Semiconductors' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Sivers Semiconductors' P/S?

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 we suspected, our examination of Sivers Semiconductors' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Sivers Semiconductors that you need to be mindful of.

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.