Lacklustre Performance Is Driving Qorvo, Inc.'s (NASDAQ:QRVO) 30% Price Drop

The Qorvo, Inc. (NASDAQ:QRVO) share price has fared very poorly over the last month, falling by a substantial 30%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 19% share price drop.

Since its price has dipped substantially, Qorvo'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 4.1x and even P/S above 10x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Qorvo

What Does Qorvo's Recent Performance Look Like?

Recent times haven't been great for Qorvo as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Qorvo?

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

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 13% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 3.9% each year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 25% each year, which is noticeably more attractive.

In light of this, it's understandable that Qorvo's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Qorvo's P/S Mean For Investors?

Qorvo's P/S looks about as weak as its stock price lately. 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.

As we suspected, our examination of Qorvo's analyst forecasts revealed that its inferior revenue outlook is contributing 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Qorvo with six simple checks on some of these key factors.

If you're unsure about the strength of Qorvo'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.