With a median price-to-sales (or "P/S") ratio of close to 1.3x in the Tech industry in the United States, you could be forgiven for feeling indifferent about Corsair Gaming, Inc.'s (NASDAQ:CRSR) P/S ratio of 1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Corsair Gaming

How Corsair Gaming Has Been Performing

There hasn't been much to differentiate Corsair Gaming's and the industry's retreating revenue lately. The P/S ratio is probably moderate because investors think the company's revenue trend will continue to follow the rest of the industry. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.

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

In order to justify its P/S ratio, Corsair Gaming would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.1%. As a result, revenue from three years ago have also fallen 2.1% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 10% during the coming year according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 4.1%, which is noticeably less attractive.

In light of this, it's curious that Corsair Gaming's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

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.

Looking at Corsair Gaming's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Corsair Gaming that you should be aware of.

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.