Intel Corporation's (NASDAQ:INTC) Share Price Boosted 26% But Its Business Prospects Need A Lift Too

Intel Corporation (NASDAQ:INTC) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 35% in the last year.

Even after such a large jump in price, Intel may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.6x, considering almost half of all companies in the Semiconductor industry in the United States have P/S ratios greater than 4.4x and even P/S higher than 11x aren't out of the ordinary. 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 Intel

How Intel Has Been Performing

Intel 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. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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What Are Revenue Growth Metrics Telling Us About The Low P/S?

Intel'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 3.7% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 28% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 3.6% per annum as estimated by the analysts watching the company. That's shaping up to be materially lower than the 23% per annum growth forecast for the broader industry.

With this information, we can see why Intel is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Intel's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Intel's P/S close to the industry median. 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.

As expected, our analysis of Intel's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Intel with six simple checks.

If you're unsure about the strength of Intel'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.