To the annoyance of some shareholders, BIT Mining Limited (NYSE:BTCM) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 43% in that time.
Following the heavy fall in price, BIT Mining may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.7x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4x and even P/S higher than 10x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for BIT Mining
What Does BIT Mining's Recent Performance Look Like?
While the industry has experienced revenue growth lately, BIT Mining'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. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.
Want the full picture on analyst estimates for the company? Then our free report on BIT Mining will help you uncover what's on the horizon.Do Revenue Forecasts Match The Low P/S Ratio?
The only time you'd be truly comfortable seeing a P/S as depressed as BIT Mining's is when the company's growth is on track to lag the industry decidedly.
Retrospectively, the last year delivered a frustrating 24% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 39% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 12% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 15%, which is noticeably more attractive.
With this information, we can see why BIT Mining is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
What Does BIT Mining's P/S Mean For Investors?
Having almost fallen off a cliff, BIT Mining's share price has pulled its P/S way down as well. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
As expected, our analysis of BIT Mining's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. The company will need a change of fortune to justify the P/S rising higher in the future.
Don't forget that there may be other risks. For instance, we've identified 3 warning signs for BIT Mining (1 is concerning) you should be aware of.
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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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.