Slammed 26% Backblaze, Inc. (NASDAQ:BLZE) Screens Well Here But There Might Be A Catch

Backblaze, Inc. (NASDAQ:BLZE) shares have had a horrible month, losing 26% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 49% in that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Backblaze's P/S ratio of 2.2x, since the median price-to-sales (or "P/S") ratio for the IT industry in the United States is also close to 2.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Backblaze

How Has Backblaze Performed Recently?

With revenue growth that's superior to most other companies of late, Backblaze has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Backblaze.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Backblaze's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The latest three year period has also seen an excellent 89% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 14% during the coming year according to the eight analysts following the company. That's shaping up to be materially higher than the 10% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Backblaze's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Backblaze's P/S Mean For Investors?

Backblaze's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Backblaze currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Having said that, be aware Backblaze is showing 3 warning signs in our investment analysis, and 1 of those doesn't sit too well with us.

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