Some indie Semiconductor, Inc. (NASDAQ:INDI) Shareholders Look For Exit As Shares Take 32% Pounding

indie Semiconductor, Inc. (NASDAQ:INDI) shareholders won't be pleased to see that the share price has had a very rough month, dropping 32% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 41% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about indie Semiconductor's P/S ratio of 3.2x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in the United States is also close to 3.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for indie Semiconductor

What Does indie Semiconductor's Recent Performance Look Like?

Recent times haven't been great for indie Semiconductor as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For indie Semiconductor?

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

Taking a look back first, we see that the company grew revenue by an impressive 51% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 30% during the coming year according to the eight analysts following the company. With the industry predicted to deliver 42% growth, the company is positioned for a weaker revenue result.

In light of this, it's curious that indie Semiconductor's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does indie Semiconductor's P/S Mean For Investors?

indie Semiconductor's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

Our look at the analysts forecasts of indie Semiconductor's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

It is also worth noting that we have found 2 warning signs for indie Semiconductor that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.