The BIT Mining Limited (NYSE:BTCM) share price has done very well over the last month, posting an excellent gain of 27%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 15% in the last twelve months.
Even after such a large jump in price, BIT Mining may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 5.3x and even P/S higher than 11x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
See our latest analysis for BIT Mining
How BIT Mining Has Been Performing
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. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Keen to find out how analysts think BIT Mining's future stacks up against the industry? In that case, our free report is a great place to start.Is There Any Revenue Growth Forecasted For BIT Mining?
BIT Mining's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much 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 24%. The last three years don't look nice either as the company has shrunk revenue by 39% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 12% over the next year. With the industry predicted to deliver 15% growth, the company is positioned for a weaker revenue result.
With this in consideration, its clear as to why BIT Mining'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 BIT Mining's P/S?
Even after such a strong price move, BIT Mining's P/S still trails the rest of the industry. 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 BIT Mining's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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 5 warning signs for BIT Mining (2 are a bit unpleasant!) that we have uncovered.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.