The Market Doesn't Like What It Sees From Digital Turbine, Inc.'s (NASDAQ:APPS) Revenues Yet As Shares Tumble 25%

The Digital Turbine, Inc. (NASDAQ:APPS) share price has softened a substantial 25% over the previous 30 days, handing back much of the gains the stock has made lately. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Since its price has dipped substantially, Digital Turbine may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4x and even P/S higher than 9x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Digital Turbine

How Digital Turbine Has Been Performing

Digital Turbine 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. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Is There Any Revenue Growth Forecasted For Digital Turbine?

In order to justify its P/S ratio, Digital Turbine would need to produce anemic growth that's substantially trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 16%. The last three years don't look nice either as the company has shrunk revenue by 27% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.8% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 15%, which is noticeably more attractive.

With this in consideration, its clear as to why Digital Turbine's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Shares in Digital Turbine have plummeted and its P/S has followed suit. 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.

We've established that Digital Turbine maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Digital Turbine (2 are concerning!) that we have uncovered.

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