Lacklustre Performance Is Driving Identiv, Inc.'s (NASDAQ:INVE) 31% Price Drop

Identiv, Inc. (NASDAQ:INVE) shareholders won't be pleased to see that the share price has had a very rough month, dropping 31% and undoing the prior period's positive performance. Longer-term shareholders would now have taken a real hit with the stock declining 5.4% in the last year.

Following the heavy fall in price, Identiv's price-to-sales (or "P/S") ratio of 1.2x might make it look like a buy right now compared to the Electronic industry in the United States, where around half of the companies have P/S ratios above 1.8x and even P/S above 5x 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.

See our latest analysis for Identiv

What Does Identiv's P/S Mean For Shareholders?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Identiv has been doing quite well of late. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. Those who are bullish on Identiv will be hoping that this isn't the case and the company continues to beat out the industry.

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

How Is Identiv's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Identiv's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.1%. Pleasingly, revenue has also lifted 34% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 3.2% each year as estimated by the four analysts watching the company. With the industry predicted to deliver 9.1% growth per annum, the company is positioned for a weaker revenue result.

With this information, we can see why Identiv 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.

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

The southerly movements of Identiv's shares means its P/S is now sitting at a pretty low level. 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 expected, our analysis of Identiv's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Identiv.

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.