Bit Digital, Inc. (NASDAQ:BTBT) Stocks Pounded By 31% But Not Lagging Industry On Growth Or Pricing

The Bit Digital, Inc. (NASDAQ:BTBT) share price has fared very poorly over the last month, falling by a substantial 31%. Looking at the bigger picture, even after this poor month the stock is up 91% in the last year.

Although its price has dipped substantially, Bit Digital may still be sending sell signals at present with a price-to-sales (or "P/S") ratio of 5.6x, when you consider almost half of the companies in the Software industry in the United States have P/S ratios under 4.3x and even P/S lower than 1.6x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Bit Digital

What Does Bit Digital's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Bit Digital's revenue has gone into reverse gear, which is not great. 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.

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

How Is Bit Digital's Revenue Growth Trending?

Bit Digital's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.3%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 122% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 15%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Bit Digital's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Bit Digital's P/S?

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

As we suspected, our examination of Bit Digital's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for Bit Digital (1 makes us a bit uncomfortable!) that you should be aware of.

If you're unsure about the strength of Bit Digital's 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.