To the annoyance of some shareholders, SEALSQ Corp (NASDAQ:LAES) shares are down a considerable 29% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 94% share price decline.

After such a large drop in price, SEALSQ's price-to-sales (or "P/S") ratio of 0.7x might make it look like a strong buy right now compared to the wider Semiconductor industry in the United States, where around half of the companies have P/S ratios above 4.4x and even P/S above 12x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

How Has SEALSQ Performed Recently?

With revenue growth that's inferior to most other companies of late, SEALSQ has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

In order to justify its P/S ratio, SEALSQ would need to produce anemic growth that's substantially trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. The strong recent performance means it was also able to grow revenue by 110% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 5.2% as estimated by the sole analyst watching the company. With the industry predicted to deliver 40% growth, that's a disappointing outcome.

In light of this, it's understandable that SEALSQ's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

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

Shares in SEALSQ have plummeted and its P/S has followed suit. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that SEALSQ's P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 3 warning signs for SEALSQ (1 is a bit concerning!) that we have uncovered.

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.

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