With a price-to-sales (or "P/S") ratio of 6.8x PDF Solutions, Inc. (NASDAQ:PDFS) may be sending very bearish signals at the moment, given that almost half of all the Semiconductor companies in the United States have P/S ratios under 4x and even P/S lower than 1.6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
How Has PDF Solutions Performed Recently?
PDF Solutions could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.
Want the full picture on analyst estimates for the company? Then our free report on PDF Solutions will help you uncover what's on the horizon.
Do Revenue Forecasts Match The High P/S Ratio?
There's an inherent assumption that a company should far outperform the industry for P/S ratios like PDF Solutions' to be considered reasonable.
Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Although pleasingly revenue has lifted 71% in aggregate from three years ago, notwithstanding the last 12 months. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.
Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 22% over the next year. With the industry predicted to deliver 38% growth, the company is positioned for a weaker revenue result.
With this in consideration, we believe it doesn't make sense that PDF Solutions' P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.
The Final Word
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Despite analysts forecasting some poorer-than-industry revenue growth figures for PDF Solutions, this doesn't appear to be impacting the P/S in the slightest. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.
The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for PDF Solutions with six simple checks.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
納斯達克:PDFS 市銷率爲6.8倍,PDF Solutions, Inc. (納斯達克:PDFS) 目前可能正在發出非常消極的信號,因爲在美國近一半的半導體公司的市銷率低於4倍,甚至低於1.6倍的市銷率也並非罕見。儘管如此,我們需要深入挖掘,以判斷這種高度提升的市銷率是否有合理的基礎。
PDF Solutions 最近的表現如何?
PDF Solutions 的業績可能不如最近大多數其他公司,市場可能預期未來的營業收入表現將發生逆轉,這導致了市銷率的提升。然而,如果情況並非如此,投資者可能會因爲過高的股價而陷入困境。
想要了解該公司分析師的全面預估嗎?那麼我們的 PDF Solutions 免費報告將幫助您了解未來的走勢。