Macronix International Co., Ltd.'s (TWSE:2337) Business And Shares Still Trailing The Industry

You may think that with a price-to-sales (or "P/S") ratio of 1.9x Macronix International Co., Ltd. (TWSE:2337) is a stock worth checking out, seeing as almost half of all the Semiconductor companies in Taiwan have P/S ratios greater than 3.6x and even P/S higher than 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Macronix International

What Does Macronix International's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, Macronix International has been very sluggish. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Macronix International's Revenue Growth Trending?

Macronix International's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 33% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 34% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 12% as estimated by the six analysts watching the company. With the industry predicted to deliver 25% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Macronix International's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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.

We've established that Macronix International maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Macronix International has 1 warning sign we think you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.