Revenues Working Against Peraso Inc.'s (NASDAQ:PRSO) Share Price Following 35% Dive

Peraso Inc. (NASDAQ:PRSO) shares have had a horrible month, losing 35% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 82% loss during that time.

Following the heavy fall in price, Peraso's price-to-sales (or "P/S") ratio of 1.7x might make it look like a strong buy right now compared to the wider Semiconductor industry in the United States, where around half of the companies have P/S ratios above 4x and even P/S above 8x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for Peraso

How Peraso Has Been Performing

Peraso certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

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.

Taking a look back first, we see that the company grew revenue by an impressive 23% last year. The latest three year period has also seen an excellent 74% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 27% over the next year. With the industry predicted to deliver 42% growth, 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 Final Word

Shares in Peraso have plummeted and its P/S has followed suit. 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.

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. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

You should always think about risks. Case in point, we've spotted 4 warning signs for Peraso you should be aware of, and 2 of them shouldn't be ignored.

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