With A 26% Price Drop For Sivers Semiconductors AB (publ) (STO:SIVE) You'll Still Get What You Pay For

The Sivers Semiconductors AB (publ) (STO:SIVE) share price has softened a substantial 26% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 36% in that time.

Although its price has dipped substantially, you could still be forgiven for thinking Sivers Semiconductors is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.6x, considering almost half the companies in Sweden's Semiconductor industry have P/S ratios below 2.8x. 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?

Recent times have been pleasing for Sivers Semiconductors as its revenue has risen in spite of the industry's average revenue going into reverse. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

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?

The only time you'd be truly comfortable seeing a P/S as high as Sivers Semiconductors' is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Although pleasingly revenue has lifted 85% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Looking ahead now, revenue is anticipated to climb by 55% per year during the coming three years according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 12% per annum, which is noticeably less attractive.

With this information, we can see why Sivers Semiconductors is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Sivers Semiconductors' P/S remain high even after its stock plunged. 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.

We've established that Sivers Semiconductors maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Semiconductor industry, as expected. 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.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Sivers Semiconductors (2 are significant!) that you should be aware of before investing here.

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.