BigCommerce Holdings, Inc.'s (NASDAQ:BIGC) Business And Shares Still Trailing The Industry

BigCommerce Holdings, Inc.'s (NASDAQ:BIGC) price-to-sales (or "P/S") ratio of 1.1x might make it look like a buy right now compared to the IT industry in the United States, where around half of the companies have P/S ratios above 2.4x and even P/S above 7x are quite common. 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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View our latest analysis for BigCommerce Holdings

How BigCommerce Holdings Has Been Performing

Recent times haven't been great for BigCommerce Holdings as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could 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 BigCommerce Holdings.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a decent 5.3% gain to the company's revenues. Pleasingly, revenue has also lifted 40% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the twelve analysts covering the company suggest revenue should grow by 3.7% over the next year. With the industry predicted to deliver 21% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why BigCommerce Holdings' 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.

What We Can Learn From BigCommerce Holdings' P/S?

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.

As expected, our analysis of BigCommerce Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

It is also worth noting that we have found 1 warning sign for BigCommerce Holdings that you need to take into consideration.

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