Yahoo Finance SoftwareONE Holding AG's (VTX:SWON) Popularity With Investors Is Clear
When close to half the companies in the Electronic industry in Switzerland have price-to-sales ratios (or "P/S") below 1.5x, you may consider SoftwareONE Holding AG (VTX:SWON) as a stock to potentially avoid with its 2.2x 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 SoftwareONE Holding
How Has SoftwareONE Holding Performed Recently?
There hasn't been much to differentiate SoftwareONE Holding's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Want the full picture on analyst estimates for the company? Then our free report on SoftwareONE Holding will help you uncover what's on the horizon.
Is There Enough Revenue Growth Forecasted For SoftwareONE Holding?
In order to justify its P/S ratio, SoftwareONE Holding would need to produce impressive growth in excess of the industry.
Taking a look back first, we see that the company managed to grow revenues by a handy 9.8% last year. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 87% in total over the last three years. 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 11% each year as estimated by the ten analysts watching the company. With the industry only predicted to deliver 7.1% per year, the company is positioned for a stronger revenue result.
With this information, we can see why SoftwareONE 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 Does SoftwareONE Holding's P/S Mean For Investors?
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our look into SoftwareONE Holding shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
And what about other risks? Every company has them, and we've spotted 1 warning sign for SoftwareONE Holding you should know about.
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.
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