Intchains Group Limited's (NASDAQ:ICG) Stock Retreats 27% But Revenues Haven't Escaped The Attention Of Investors

Intchains Group Limited (NASDAQ:ICG) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 16% in that time.

Although its price has dipped substantially, Intchains Group may still be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 13.2x, when you consider almost half of the companies in the Semiconductor industry in the United States have P/S ratios under 4.3x and even P/S lower than 1.7x aren't out of the ordinary. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Intchains Group

What Does Intchains Group's P/S Mean For Shareholders?

Intchains Group hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Intchains Group will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Intchains Group?

Intchains Group's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.2%. As a result, revenue from three years ago have also fallen 45% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 148% over the next year. With the industry only predicted to deliver 43%, the company is positioned for a stronger revenue result.

With this information, we can see why Intchains Group 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

A significant share price dive has done very little to deflate Intchains Group's very lofty P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Intchains Group's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Intchains Group (1 is a bit concerning) you should be aware of.

If you're unsure about the strength of Intchains Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.