Lacklustre Performance Is Driving Peraso Inc.'s (NASDAQ:PRSO) 55% Price Drop

Peraso Inc. (NASDAQ:PRSO) shareholders that were waiting for something to happen have been dealt a blow with a 55% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 90% loss during that time.

Following the heavy fall in price, Peraso may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Semiconductor industry in the United States have P/S ratios greater than 3.8x and even P/S higher than 9x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

Check out our latest analysis for Peraso

What Does Peraso's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Peraso'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. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Peraso's Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Peraso's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 19%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 31% in total over the last three years. 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.

Looking ahead now, revenue is anticipated to climb by 14% per year during the coming three years according to the three analysts following the company. With the industry predicted to deliver 25% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Peraso's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Peraso's P/S

Having almost fallen off a cliff, Peraso's share price has pulled its P/S way down as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As expected, our analysis of Peraso'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.

There are also other vital risk factors to consider and we've discovered 5 warning signs for Peraso (3 are concerning!) that you should be aware of before investing here.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.