Bit Digital, Inc. (NASDAQ:BTBT) Stocks Pounded By 27% But Not Lagging Industry On Growth Or Pricing

Bit Digital, Inc. (NASDAQ:BTBT) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. The good news is that in the last year, the stock has shone bright like a diamond, gaining 101%.

In spite of the heavy fall in price, Bit Digital may still be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 6.3x, since almost half of all companies in the Software in the United States have P/S ratios under 4.5x and even P/S lower than 1.8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Bit Digital

How Bit Digital Has Been Performing

Bit Digital could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Bit Digital's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 3.3% decrease to the company's top line. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Looking ahead now, revenue is anticipated to climb by 124% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 15% growth forecast for the broader industry.

With this information, we can see why Bit Digital is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Bit Digital's P/S Mean For Investors?

Bit Digital's P/S remain high even after its stock plunged. 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.

We've established that Bit Digital maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 8 warning signs for Bit Digital (2 are a bit concerning!) that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.