Why Investors Shouldn't Be Surprised By Corsair Gaming, Inc.'s (NASDAQ:CRSR) 26% Share Price Plunge

Unfortunately for some shareholders, the Corsair Gaming, Inc. (NASDAQ:CRSR) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 12% in that time.

After such a large drop in price, Corsair Gaming's price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Tech industry in the United States, where around half of the companies have P/S ratios above 1.8x and even P/S above 7x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Corsair Gaming

How Has Corsair Gaming Performed Recently?

With revenue growth that's superior to most other companies of late, Corsair Gaming has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Any Revenue Growth Forecasted For Corsair Gaming?

Corsair Gaming's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 9.8%. Still, lamentably revenue has fallen 2.5% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 7.0% over the next year. That's shaping up to be materially lower than the 10% growth forecast for the broader industry.

In light of this, it's understandable that Corsair Gaming'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.

What Does Corsair Gaming's P/S Mean For Investors?

The southerly movements of Corsair Gaming's shares means its P/S is now sitting at a pretty low level. 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 we suspected, our examination of Corsair Gaming's analyst forecasts revealed that its inferior revenue outlook is contributing 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

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 Corsair Gaming with six simple checks.

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.