QuickLogic Corporation (NASDAQ:QUIK) shareholders have had their patience rewarded with a 34% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 27% over that time.

Following the firm bounce in price, QuickLogic's price-to-sales (or "P/S") ratio of 6.8x might make it look like a strong sell right now compared to other companies in the Semiconductor industry in the United States, where around half of the companies have P/S ratios below 4.2x and even P/S below 1.7x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

What Does QuickLogic's Recent Performance Look Like?

Recent times haven't been great for QuickLogic as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

What Are Revenue Growth Metrics Telling Us About The High P/S?

QuickLogic's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. Pleasingly, revenue has also lifted 91% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the three analysts following the company. That's shaping up to be materially lower than the 39% growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that QuickLogic's P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. 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.

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

Shares in QuickLogic have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've concluded that QuickLogic currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

It is also worth noting that we have found 3 warning signs for QuickLogic that you need to take into consideration.

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.

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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.