The Ichor Holdings, Ltd. (NASDAQ:ICHR) share price has fared very poorly over the last month, falling by a substantial 25%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 40% in that time.
Since its price has dipped substantially, Ichor Holdings may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.9x, since almost half of all companies in the Semiconductor industry in the United States have P/S ratios greater than 3.3x and even P/S higher than 8x 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 Ichor Holdings
How Ichor Holdings Has Been Performing
Recent times haven't been great for Ichor Holdings as its revenue has been rising slower than most other companies. 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.
Keen to find out how analysts think Ichor Holdings' future stacks up against the industry? In that case, our free report is a great place to start.Is There Any Revenue Growth Forecasted For Ichor Holdings?
In order to justify its P/S ratio, Ichor Holdings would need to produce anemic growth that's substantially trailing the industry.
Taking a look back first, we see that the company managed to grow revenues by a handy 4.4% last year. Still, lamentably revenue has fallen 23% 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.
Turning to the outlook, the next three years should generate growth of 9.0% each year as estimated by the five analysts watching the company. With the industry predicted to deliver 24% growth per annum, the company is positioned for a weaker revenue result.
With this information, we can see why Ichor Holdings 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.
The Final Word
Shares in Ichor Holdings have plummeted and its P/S has followed suit. 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.
As we suspected, our examination of Ichor Holdings' 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. It's hard to see the share price rising strongly in the near future under these circumstances.
A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Ichor Holdings with six simple checks.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.