Sensirion Holding AG (VTX:SENS) Not Lagging Industry On Growth Or Pricing

When close to half the companies in the Electronic industry in Switzerland have price-to-sales ratios (or "P/S") below 1.4x, you may consider Sensirion Holding AG (VTX:SENS) as a stock to avoid entirely with its 4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Sensirion Holding

How Has Sensirion Holding Performed Recently?

Sensirion 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.

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

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Sensirion Holding's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 28% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 8.1% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 16% each year as estimated by the six analysts watching the company. With the industry only predicted to deliver 9.4% per annum, the company is positioned for a stronger revenue result.

With this information, we can see why Sensirion Holding is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Sensirion Holding's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Sensirion Holding maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

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

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.