There's Reason For Concern Over Bigblu Broadband plc's (LON:BBB) Massive 32% Price Jump

Bigblu Broadband plc (LON:BBB) shares have had a really impressive month, gaining 32% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 4.2% isn't as attractive.

Even after such a large jump in price, there still wouldn't be many who think Bigblu Broadband's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in the United Kingdom's Telecom industry is similar at about 1.1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Bigblu Broadband

How Bigblu Broadband Has Been Performing

Bigblu Broadband hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Bigblu Broadband's future stacks up against the industry? In that case, our free report is a great place to start.

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

Bigblu Broadband's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 4.5%. This means it has also seen a slide in revenue over the longer-term as revenue is down 6.8% in total over the last three years. 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 only analyst covering the company suggest revenue growth is heading into negative territory, declining 3.3% over the next year. With the industry predicted to deliver 0.7% growth, that's a disappointing outcome.

With this information, we find it concerning that Bigblu Broadband is trading at a fairly similar P/S compared to 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. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What Does Bigblu Broadband's P/S Mean For Investors?

Bigblu Broadband's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

It appears that Bigblu Broadband currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Bigblu Broadband (of which 1 is concerning!) you should know about.

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.