Revenues Working Against BigCommerce Holdings, Inc.'s (NASDAQ:BIGC) Share Price

You may think that with a price-to-sales (or "P/S") ratio of 1.7x BigCommerce Holdings, Inc. (NASDAQ:BIGC) is a stock worth checking out, seeing as almost half of all the IT companies in the United States have P/S ratios greater than 2.6x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for BigCommerce Holdings

How Has BigCommerce Holdings Performed Recently?

BigCommerce Holdings' revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, BigCommerce Holdings would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. This was backed up an excellent period prior to see revenue up by 67% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 4.7% during the coming year according to the twelve analysts following the company. That's shaping up to be materially lower than the 11% growth forecast for the broader industry.

With this in consideration, its clear as to why BigCommerce Holdings' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

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

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.

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. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for BigCommerce Holdings that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.