Investors Holding Back On Blue Bird Corporation (NASDAQ:BLBD)

When you see that almost half of the companies in the Machinery industry in the United States have price-to-sales ratios (or "P/S") above 1.4x, Blue Bird Corporation (NASDAQ:BLBD) looks to be giving off some buy signals with its 0.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Blue Bird

How Blue Bird Has Been Performing

Recent times have been advantageous for Blue Bird as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Blue Bird.

How Is Blue Bird's Revenue Growth Trending?

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.

Taking a look back first, we see that the company grew revenue by an impressive 42% last year. As a result, it also grew revenue by 29% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 8.3% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 1.6%, which is noticeably less attractive.

With this information, we find it odd that Blue Bird is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Blue Bird's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To us, it seems Blue Bird currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You always need to take note of risks, for example - Blue Bird has 1 warning sign we think you should be aware of.

If you're unsure about the strength of Blue Bird's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.