There's No Escaping BGSF, Inc.'s (NYSE:BGSF) Muted Revenues Despite A 26% Share Price Rise

Despite an already strong run, BGSF, Inc. (NYSE:BGSF) shares have been powering on, with a gain of 26% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

Although its price has surged higher, it would still be understandable if you think BGSF is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.2x, considering almost half the companies in the United States' Professional Services industry have P/S ratios above 1.2x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for BGSF

What Does BGSF's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, BGSF's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For BGSF?

In order to justify its P/S ratio, BGSF would need to produce sluggish growth that's trailing 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 13%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 24% during the coming year according to the only analyst following the company. Meanwhile, the broader industry is forecast to expand by 7.4%, which paints a poor picture.

With this information, we are not surprised that BGSF is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From BGSF's P/S?

The latest share price surge wasn't enough to lift BGSF's P/S close to the industry median. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that BGSF's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, BGSF's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 4 warning signs for BGSF (2 are concerning!) that you should be aware of.

If these risks are making you reconsider your opinion on BGSF, 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.