Qorvo, Inc.'s (NASDAQ:QRVO) Prospects Need A Boost To Lift Shares

Qorvo, Inc.'s (NASDAQ:QRVO) price-to-sales (or "P/S") ratio of 2.5x might make it look like a buy right now compared to the Semiconductor industry in the United States, where around half of the companies have P/S ratios above 3.8x and even P/S above 10x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Qorvo

How Qorvo Has Been Performing

With revenue growth that's inferior to most other companies of late, Qorvo has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Qorvo's Revenue Growth Trending?

In order to justify its P/S ratio, Qorvo would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 7.7% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 6.1% each year over the next three years. That's shaping up to be materially lower than the 24% per year growth forecast for the broader industry.

With this information, we can see why Qorvo is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of Qorvo'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.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Qorvo with six simple checks.

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.