Take Care Before Jumping Onto Sivers Semiconductors AB (publ) (STO:SIVE) Even Though It's 47% Cheaper

To the annoyance of some shareholders, Sivers Semiconductors AB (publ) (STO:SIVE) shares are down a considerable 47% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 62% share price decline.

In spite of the heavy fall in price, it's still not a stretch to say that Sivers Semiconductors' price-to-sales (or "P/S") ratio of 1.8x right now seems quite "middle-of-the-road" compared to the Semiconductor industry in Sweden, where the median P/S ratio is around 2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Sivers Semiconductors

How Has Sivers Semiconductors Performed Recently?

Sivers Semiconductors certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Keen to find out how analysts think Sivers Semiconductors' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Sivers Semiconductors' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Sivers Semiconductors' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 23% last year. The latest three year period has also seen an excellent 96% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 63% per annum during the coming three years according to the only analyst following the company. That's shaping up to be materially higher than the 15% per year growth forecast for the broader industry.

With this information, we find it interesting that Sivers Semiconductors is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Sivers Semiconductors' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Looking at Sivers Semiconductors' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Sivers Semiconductors (of which 3 are significant!) you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.