Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) Looks Inexpensive After Falling 31% But Perhaps Not Attractive Enough

Simply Wall St ·  Mar 10 09:25

Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) shares have had a horrible month, losing 31% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 87% share price decline.

Since its price has dipped substantially, Maxeon Solar Technologies may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Semiconductor industry in the United States have P/S ratios greater than 4.5x and even P/S higher than 11x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

NasdaqGS:MAXN Price to Sales Ratio vs Industry March 10th 2024

How Maxeon Solar Technologies Has Been Performing

With revenue growth that's inferior to most other companies of late, Maxeon Solar Technologies has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Maxeon Solar Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

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

Maxeon Solar Technologies' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. Revenue has also lifted 26% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 3.8% per year during the coming three years according to the nine analysts following the company. That's shaping up to be materially lower than the 25% per annum growth forecast for the broader industry.

In light of this, it's understandable that Maxeon Solar Technologies' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Maxeon Solar Technologies' P/S

Having almost fallen off a cliff, Maxeon Solar Technologies' share price has pulled its P/S way down as well. 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.

We've established that Maxeon Solar Technologies maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware Maxeon Solar Technologies is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us.

If these risks are making you reconsider your opinion on Maxeon Solar Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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