Investors Still Aren't Entirely Convinced By BitFuFu Inc.'s (NASDAQ:FUFU) Revenues Despite 28% Price Jump

Those holding BitFuFu Inc. (NASDAQ:FUFU) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 21% over that time.

Even after such a large jump in price, BitFuFu may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.7x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 5.6x and even P/S higher than 12x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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Check out our latest analysis for BitFuFu

How Has BitFuFu Performed Recently?

Recent times haven't been great for BitFuFu as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

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

In order to justify its P/S ratio, BitFuFu would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a decent 7.1% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 205% 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 54% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.

With this in consideration, we find it intriguing that BitFuFu's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On BitFuFu's P/S

Even after such a strong price move, BitFuFu's P/S still trails the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at BitFuFu's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for BitFuFu you should be aware of, and 1 of them doesn't sit too well with us.

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.