Investors Don't See Light At End Of Bitnine Co, Ltd.'s (KOSDAQ:357880) Tunnel And Push Stock Down 26%

To the annoyance of some shareholders, Bitnine Co, Ltd. (KOSDAQ:357880) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 56% share price decline.

Since its price has dipped substantially, considering around half the companies operating in Korea's Software industry have price-to-sales ratios (or "P/S") above 2.3x, you may consider Bitnine Co as an solid investment opportunity with its 1.5x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Bitnine Co

What Does Bitnine Co's P/S Mean For Shareholders?

Recent times have been quite advantageous for Bitnine Co as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If you 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.

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 Bitnine Co's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Bitnine Co?

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

Retrospectively, the last year delivered an exceptional 45% gain to the company's top line. Pleasingly, revenue has also lifted 102% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 46% shows it's noticeably less attractive.

With this information, we can see why Bitnine Co is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Bitnine Co's P/S

Bitnine Co's P/S has taken a dip along with its share price. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

In line with expectations, Bitnine Co maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - Bitnine Co has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.