Take Care Before Jumping Onto Sivers Semiconductors AB (publ) (STO:SIVE) Even Though It's 27% Cheaper

Sivers Semiconductors AB (publ) (STO:SIVE) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 30% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Sivers Semiconductors' P/S ratio of 2.8x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in Sweden is also close to 2.6x. 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.

View our latest analysis for Sivers Semiconductors

How Sivers Semiconductors Has Been Performing

With revenue growth that's inferior to most other companies of late, Sivers Semiconductors has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may 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 P/S Ratio?

The only time you'd be comfortable seeing a P/S like Sivers Semiconductors' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 6.9% gain to the company's revenues. Pleasingly, revenue has also lifted 78% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 56% per year during the coming three years according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 13% per year, which is noticeably less attractive.

With this information, we find it interesting that Sivers Semiconductors is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

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

With its share price dropping off a cliff, the P/S for Sivers Semiconductors looks to be in line with the rest of the Semiconductor industry. 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.

Despite enticing revenue growth figures that outpace the industry, Sivers Semiconductors' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You need to take note of risks, for example - Sivers Semiconductors has 4 warning signs (and 3 which are significant) we think you should know about.

If these risks are making you reconsider your opinion on Sivers Semiconductors, 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.