What happened
Corsair Gaming (CRSR 0.55%) stock is posting strong gains Thursday. The gaming peripherals company's share price was up roughly 9.3% as of 3 p.m. ET, according to data from S&P Global Market Intelligence.
Corsair published its first-quarter earnings results after the market closed on May 10, and the company's share price is bounding following stronger-than-expected sales in the quarter. While the company's non-GAAP (adjusted) earnings per share were in line with the average analyst estimate, sales for the period came in significantly higher than anticipated. The company posted revenue of roughly $354 million in the period, topping Wall Street's target of $350 million in sales.
So what
While Corsair's revenue fell roughly 7% year over year in Q1, it still came in significantly above what the market had anticipated. Corsair's business posted very strong sales in 2021 amid pandemic-driven tailwinds, but business performance has been a bit lumpy recently. Now it looks like the company might be on course to get back to posting revenue growth.
For the full-year period, management expects sales to come in between $1.35 billion and $1.55 billion. For comparison, the business posted annual revenue of $1.375 billion this year. While sales dropped in the first quarter, the company's midpoint guidance range suggests that management believes there's a significant chance that the business will manage to increase annual revenue this year.
The company also expects adjusted operating income to come in between $75 million and $95 million, representing a significant increase from the approximately $34.6 million in adjusted operating income it posted last year.
Now what
Following the recent rally, Corsair stock is now up roughly 27% year to date. On the other hand, the company's share price is still down roughly 63% from the lifetime high it reached shortly after its initial public offering in late 2020.
CRSR PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio. PS Ratio = price-to-sales ratio.
With a market cap of roughly $1.9 billion, Corsair now trades at roughly 33 times this year's expected earnings and 1.3 times expected sales. The valuation disparity between the company's price-to-earnings and price-to-sales ratios largely stems from the company operating in a relatively low-margin product category at risk of pressure from competitors.
If the company can prove that its brands have staying power, investors might be willing to assign significantly higher valuation multiples. But the threat of commodification trends could further erode the company's margins, so Corsair's forward sales and earnings outlook remains somewhat speculative.
