The Market Doesn't Like What It Sees From MaxLinear, Inc.'s (NASDAQ:MXL) Revenues Yet As Shares Tumble 32%

MaxLinear, Inc. (NASDAQ:MXL) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 44% share price drop.

After such a large drop in price, MaxLinear's price-to-sales (or "P/S") ratio of 2.6x might make it look like a buy right now compared to the Semiconductor industry in the United States, where around half of the companies have P/S ratios above 4.4x and even P/S above 11x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for MaxLinear

What Does MaxLinear's Recent Performance Look Like?

While the industry has experienced revenue growth lately, MaxLinear's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think MaxLinear's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For MaxLinear?

In order to justify its P/S ratio, MaxLinear would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 56%. This means it has also seen a slide in revenue over the longer-term as revenue is down 42% in total over the last three years. 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 9.0% each year as estimated by the ten analysts watching the company. That's shaping up to be materially lower than the 27% per year growth forecast for the broader industry.

With this in consideration, its clear as to why MaxLinear's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From MaxLinear's P/S?

MaxLinear's P/S has taken a dip along with its share price. 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 MaxLinear 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.

Before you settle on your opinion, we've discovered 2 warning signs for MaxLinear that you should be aware of.

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

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