Universal Electronics Inc.'s (NASDAQ:UEIC) P/S Is Still On The Mark Following 49% Share Price Bounce

Those holding Universal Electronics Inc. (NASDAQ:UEIC) shares would be relieved that the share price has rebounded 49% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 42% over that time.

In spite of the firm bounce in price, there still wouldn't be many who think Universal Electronics' price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in the United States' Consumer Durables industry is similar at about 0.5x. 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.

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View our latest analysis for Universal Electronics

What Does Universal Electronics' Recent Performance Look Like?

Universal Electronics 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. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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How Is Universal Electronics' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Universal Electronics' to be considered reasonable.

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 2.1%. This means it has also seen a slide in revenue over the longer-term as revenue is down 32% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 2.8% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 2.9%, which is not materially different.

In light of this, it's understandable that Universal Electronics' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Universal Electronics' P/S

Its shares have lifted substantially and now Universal Electronics' P/S is back within range of the industry median. 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.

Our look at Universal Electronics' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for Universal Electronics you should be aware of.

If you're unsure about the strength of Universal Electronics' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.