WEBULL

Revenues Not Telling The Story For Sol-Gel Technologies Ltd. (NASDAQ:SLGL) After Shares Rise 30%

Simply Wall St · 3d ago

Despite an already strong run, Sol-Gel Technologies Ltd. (NASDAQ:SLGL) shares have been powering on, with a gain of 30% in the last thirty days. The last 30 days were the cherry on top of the stock's 728% gain in the last year, which is nothing short of spectacular.

Following the firm bounce in price, Sol-Gel Technologies may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 6.2x, since almost half of all companies in the Pharmaceuticals in the United States have P/S ratios under 4.2x and even P/S lower than 1.3x are not unusual. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Sol-Gel Technologies

ps-multiple-vs-industry
NasdaqCM:SLGL Price to Sales Ratio vs Industry December 11th 2025

How Sol-Gel Technologies Has Been Performing

With revenue growth that's superior to most other companies of late, Sol-Gel Technologies has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Sol-Gel Technologies will help you uncover what's on the horizon.

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

There's an inherent assumption that a company should outperform the industry for P/S ratios like Sol-Gel Technologies' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 62%. Still, revenue has fallen 23% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue growth is heading into negative territory, declining 46% over the next year. Meanwhile, the broader industry is forecast to expand by 25%, which paints a poor picture.

With this information, we find it concerning that Sol-Gel Technologies is trading at a P/S higher than the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh heavily on the share price eventually.

The Final Word

Sol-Gel Technologies' P/S is on the rise since its shares have risen strongly. 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.

For a company with revenues that are set to decline in the context of a growing industry, Sol-Gel Technologies' P/S is much higher than we would've anticipated. Right now we aren't comfortable with the high P/S as the predicted future revenue decline likely to impact the positive sentiment that's propping up the P/S. Unless these conditions improve markedly, it'll be a challenging time for shareholders.

It is also worth noting that we have found 3 warning signs for Sol-Gel Technologies (1 is significant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Sol-Gel Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.