Some Navitas Semiconductor Corporation (NASDAQ:NVTS) Shareholders Look For Exit As Shares Take 29% Pounding

Navitas Semiconductor Corporation (NASDAQ:NVTS) shareholders won't be pleased to see that the share price has had a very rough month, dropping 29% and undoing the prior period's positive performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 99%, which is great even in a bull market.

Even after such a large drop in price, when almost half of the companies in the United States' Semiconductor industry have price-to-sales ratios (or "P/S") below 4x, you may still consider Navitas Semiconductor as a stock not worth researching with its 19.4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Navitas Semiconductor

How Has Navitas Semiconductor Performed Recently?

While the industry has experienced revenue growth lately, Navitas Semiconductor's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Navitas Semiconductor's Revenue Growth Trending?

Navitas Semiconductor'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.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 26%. Even so, admirably revenue has lifted 141% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 24% each year as estimated by the eight analysts watching the company. That's shaping up to be similar to the 23% each year growth forecast for the broader industry.

With this information, we find it interesting that Navitas Semiconductor is trading at a high P/S compared to the industry. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

The Bottom Line On Navitas Semiconductor's P/S

A significant share price dive has done very little to deflate Navitas Semiconductor's very lofty P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Seeing as its revenues are forecast to grow in line with the wider industry, it would appear that Navitas Semiconductor currently trades on a higher than expected P/S. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. A positive change is needed in order to justify the current price-to-sales ratio.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Navitas Semiconductor (1 makes us a bit uncomfortable!) that you need to be mindful of.

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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.