Not Many Are Piling Into BirdDog Technology Limited (ASX:BDT) Just Yet

When close to half the companies operating in the Tech industry in Australia have price-to-sales ratios (or "P/S") above 1.2x, you may consider BirdDog Technology Limited (ASX:BDT) as an attractive investment with its 0.5x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for BirdDog Technology

How Has BirdDog Technology Performed Recently?

For instance, BirdDog Technology's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on BirdDog Technology will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on BirdDog Technology's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For BirdDog Technology?

There's an inherent assumption that a company should underperform the industry for P/S ratios like BirdDog Technology's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 25%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 188% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

When compared to the industry's one-year growth forecast of 5.5%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's peculiar that BirdDog Technology's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does BirdDog Technology's P/S Mean For Investors?

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.

Our examination of BirdDog Technology revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Before you take the next step, you should know about the 2 warning signs for BirdDog Technology (1 is significant!) that we have uncovered.

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

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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.