Materion Corporation's (NYSE:MTRN) Share Price Boosted 25% But Its Business Prospects Need A Lift Too

Materion Corporation (NYSE:MTRN) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.

In spite of the firm bounce in price, Materion's price-to-sales (or "P/S") ratio of 1.2x might still make it look like a buy right now compared to the Metals and Mining industry in the United States, where around half of the companies have P/S ratios above 2.4x and even P/S above 7x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for Materion

What Does Materion's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Materion has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Materion?

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

If we review the last year of revenue growth, the company posted a worthy increase of 6.9%. Revenue has also lifted 7.1% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 2.5% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 9.0% each year, which is noticeably more attractive.

With this in consideration, its clear as to why Materion's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Materion's P/S

Despite Materion's share price climbing recently, its P/S still lags most other companies. 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 Materion maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 3 warning signs for Materion that we have uncovered.

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