Blue Bird Corporation (NASDAQ:BLBD) Might Not Be As Mispriced As It Looks

With a price-to-sales (or "P/S") ratio of 1x Blue Bird Corporation (NASDAQ:BLBD) may be sending bullish signals at the moment, given that almost half of all the Machinery companies in the United States have P/S ratios greater than 1.5x and even P/S higher than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Blue Bird

How Blue Bird Has Been Performing

Blue Bird certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Blue Bird will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Blue Bird?

The only time you'd be truly comfortable seeing a P/S as low as Blue Bird's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 34% gain to the company's top line. Pleasingly, revenue has also lifted 42% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 10% each year over the next three years. With the industry predicted to deliver 8.5% growth per year, the company is positioned for a comparable revenue result.

In light of this, it's peculiar that Blue Bird's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

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.

It looks to us like the P/S figures for Blue Bird remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Blue Bird that you need to be mindful of.

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.