Benign Growth For Bridgeline Digital, Inc. (NASDAQ:BLIN) Underpins Stock's 26% Plummet

Bridgeline Digital, Inc. (NASDAQ:BLIN) shares have had a horrible month, losing 26% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 29%, which is great even in a bull market.

Since its price has dipped substantially, Bridgeline Digital may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.7x and even P/S higher than 10x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Bridgeline Digital

What Does Bridgeline Digital's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Bridgeline Digital's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Bridgeline Digital will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Bridgeline Digital?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Bridgeline Digital's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 1.0% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 5.3% as estimated by the dual analysts watching the company. That's shaping up to be materially lower than the 18% growth forecast for the broader industry.

With this in consideration, its clear as to why Bridgeline Digital's 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 Does Bridgeline Digital's P/S Mean For Investors?

Having almost fallen off a cliff, Bridgeline Digital's share price has pulled its P/S way down as well. 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 Bridgeline Digital's 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Bridgeline Digital (1 is potentially serious) you should be aware of.

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