The Entegris, Inc. (NASDAQ:ENTG) share price has fared very poorly over the last month, falling by a substantial 27%. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.
In spite of the heavy fall in price, Entegris may still be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 4.7x, since almost half of all companies in the Semiconductor in the United States have P/S ratios under 3.8x and even P/S lower than 1.6x are not unusual. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.
What Does Entegris' Recent Performance Look Like?
Entegris hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Entegris will help you uncover what's on the horizon.
Is There Enough Revenue Growth Forecasted For Entegris?
The only time you'd be truly comfortable seeing a P/S as high as Entegris' is when the company's growth is on track to outshine the industry.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 58% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.
Shifting to the future, estimates from the twelve analysts covering the company suggest revenue should grow by 7.6% over the next year. Meanwhile, the rest of the industry is forecast to expand by 42%, which is noticeably more attractive.
In light of this, it's alarming that Entegris' P/S sits above the majority of other companies. 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
Entegris' P/S remain high even after its stock plunged. 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.
Despite analysts forecasting some poorer-than-industry revenue growth figures for Entegris, 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.
You need to take note of risks, for example - Entegris has 2 warning signs (and 1 which is potentially serious) we think 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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
過去一個月,Entegris, Inc. (NASDAQ:ENTG)的股價表現非常糟糕,下跌了27%。股價下跌,長期持股人將感到失望,因爲經過幾個有希望的季度後,股價現在幾乎持平於今年。