The Market Doesn't Like What It Sees From SkyWater Technology, Inc.'s (NASDAQ:SKYT) Revenues Yet As Shares Tumble 28%

SkyWater Technology, Inc. (NASDAQ:SKYT) shares have had a horrible month, losing 28% after a relatively good period beforehand. Indeed, the recent drop has reduced its annual gain to a relatively sedate 9.4% over the last twelve months.

Following the heavy fall in price, SkyWater Technology may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Semiconductor industry in the United States have P/S ratios greater than 4.1x and even P/S higher than 9x are not unusual. 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 SkyWater Technology

How SkyWater Technology Has Been Performing

With revenue growth that's inferior to most other companies of late, SkyWater Technology has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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 SkyWater Technology.

How Is SkyWater Technology's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 27%. The latest three year period has also seen an excellent 111% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 8.7% per annum during the coming three years according to the four analysts following the company. That's shaping up to be materially lower than the 25% per year growth forecast for the broader industry.

With this in consideration, its clear as to why SkyWater Technology's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On SkyWater Technology's P/S

Having almost fallen off a cliff, SkyWater Technology'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.

We've established that SkyWater Technology maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for SkyWater Technology with six simple checks.

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