With A 27% Price Drop For Navitas Semiconductor Corporation (NASDAQ:NVTS) You'll Still Get What You Pay For

The Navitas Semiconductor Corporation (NASDAQ:NVTS) share price has softened a substantial 27% over the previous 30 days, handing back much of the gains the stock has made lately. Longer-term, the stock has been solid despite a difficult 30 days, gaining 22% in the last year.

Although its price has dipped substantially, Navitas Semiconductor may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 15.1x, since almost half of all companies in the Semiconductor industry in the United States have P/S ratios under 4.1x and even P/S lower than 1.9x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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Check out our latest analysis for Navitas Semiconductor

What Does Navitas Semiconductor's P/S Mean For Shareholders?

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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Navitas Semiconductor?

In order to justify its P/S ratio, Navitas Semiconductor would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a frustrating 17% decrease to the company's top line. Still, the latest three year period has seen an excellent 195% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 27% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 21% per year, which is noticeably less attractive.

In light of this, it's understandable that Navitas Semiconductor's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

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.

Our look into Navitas Semiconductor shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You need to take note of risks, for example - Navitas Semiconductor has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

If you're unsure about the strength of Navitas Semiconductor'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.