Investors Don't See Light At End Of Vishay Intertechnology, Inc.'s (NYSE:VSH) Tunnel

With a price-to-sales (or "P/S") ratio of 0.8x Vishay Intertechnology, Inc. (NYSE:VSH) may be sending bullish signals at the moment, given that almost half of all the Electronic companies in the United States have P/S ratios greater than 2.3x and even P/S higher than 6x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Vishay Intertechnology

How Vishay Intertechnology Has Been Performing

While the industry has experienced revenue growth lately, Vishay Intertechnology's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. 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 Vishay Intertechnology.

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

Vishay Intertechnology's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 11%. As a result, revenue from three years ago have also fallen 13% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 5.0% as estimated by the three analysts watching the company. With the industry predicted to deliver 18% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Vishay Intertechnology's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Vishay Intertechnology's P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Vishay Intertechnology's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Vishay Intertechnology that 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.

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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.