Market Cool On BigCommerce Holdings, Inc.'s (NASDAQ:BIGC) Revenues Pushing Shares 25% Lower

BigCommerce Holdings, Inc. (NASDAQ:BIGC) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 46% share price drop.

Following the heavy fall in price, BigCommerce Holdings may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.4x, since almost half of all companies in the IT industry in the United States have P/S ratios greater than 1.9x 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.

Check out our latest analysis for BigCommerce Holdings

How BigCommerce Holdings Has Been Performing

Recent times have been advantageous for BigCommerce Holdings as its revenues have been rising faster 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 BigCommerce Holdings will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

BigCommerce Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 11%. The latest three year period has also seen an excellent 82% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 6.7% as estimated by the twelve analysts watching the company. That's shaping up to be similar to the 8.5% growth forecast for the broader industry.

With this information, we find it odd that BigCommerce Holdings is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

The southerly movements of BigCommerce Holdings' shares means its P/S is now sitting at a pretty low level. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of BigCommerce Holdings' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You always need to take note of risks, for example - BigCommerce Holdings has 3 warning signs we think you should be aware of.

If you're unsure about the strength of BigCommerce Holdings' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com