Intellicheck, Inc. (NASDAQ:IDN) Stock Catapults 27% Though Its Price And Business Still Lag The Industry

Intellicheck, Inc. (NASDAQ:IDN) shares have had a really impressive month, gaining 27% after a shaky period beforehand. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Even after such a large jump in price, Intellicheck may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 3x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 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 reduced P/S.

Our free stock report includes 2 warning signs investors should be aware of before investing in Intellicheck. Read for free now.

View our latest analysis for Intellicheck

What Does Intellicheck's Recent Performance Look Like?

Recent times haven't been great for Intellicheck as its revenue has been rising slower than most other companies. 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.

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

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

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

If we review the last year of revenue growth, the company posted a worthy increase of 5.8%. The latest three year period has also seen a 22% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 6.5% as estimated by the four analysts watching the company. With the industry predicted to deliver 15% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Intellicheck is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Intellicheck's P/S Mean For Investors?

Intellicheck's stock price has surged recently, but its but its P/S still remains modest. 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 Intellicheck maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

You always need to take note of risks, for example - Intellicheck has 2 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.