Investors Give Valens Semiconductor Ltd. (NYSE:VLN) Shares A 35% Hiding

Valens Semiconductor Ltd. (NYSE:VLN) shares have had a horrible month, losing 35% after a relatively good period beforehand. Longer-term shareholders would now have taken a real hit with the stock declining 6.4% in the last year.

Since its price has dipped substantially, Valens Semiconductor's price-to-sales (or "P/S") ratio of 3.1x 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 4x and even P/S above 10x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Valens Semiconductor

How Valens Semiconductor Has Been Performing

Valens Semiconductor could be doing better as it's been growing revenue less than most other companies lately. 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.

Want the full picture on analyst estimates for the company? Then our free report on Valens Semiconductor will help you uncover what's on the horizon.

How Is Valens Semiconductor's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 8.7%. Still, lamentably revenue has fallen 21% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 25% each year during the coming three years according to the four analysts following the company. With the industry predicted to deliver 24% growth per annum, the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Valens Semiconductor's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does Valens Semiconductor's P/S Mean For Investors?

The southerly movements of Valens Semiconductor's shares means its P/S is now sitting at a pretty low level. 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 seen that Valens Semiconductor currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Valens Semiconductor you should know about.

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.