Some Confidence Is Lacking In WISeKey International Holding AG (VTX:WIHN) As Shares Slide 25%

WISeKey International Holding AG (VTX:WIHN) shares have retraced a considerable 25% in the last month, reversing a fair amount of their solid recent performance. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 259% in the last twelve months.

In spite of the heavy fall in price, when almost half of the companies in Switzerland's Semiconductor industry have price-to-sales ratios (or "P/S") below 1.9x, you may still consider WISeKey International Holding as a stock probably not worth researching with its 2.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for WISeKey International Holding

How Has WISeKey International Holding Performed Recently?

WISeKey International Holding has been struggling lately as its revenue has declined faster than most other companies. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on WISeKey International Holding.

Is There Enough Revenue Growth Forecasted For WISeKey International Holding?

WISeKey International Holding's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

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 25%. Still, the latest three year period has seen an excellent 44% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 9.3% as estimated by the two analysts watching the company. That's shaping up to be materially lower than the 15% growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that WISeKey International Holding'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. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

There's still some elevation in WISeKey International Holding's P/S, even if the same can't be said for its share price recently. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've concluded that WISeKey International Holding 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.

Having said that, be aware WISeKey International Holding is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning.

If these risks are making you reconsider your opinion on WISeKey International Holding, 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.