Why We're Not Concerned About BigBear.ai Holdings, Inc.'s (NYSE:BBAI) Share Price

With a median price-to-sales (or "P/S") ratio of close to 1.9x in the IT industry in the United States, you could be forgiven for feeling indifferent about BigBear.ai Holdings, Inc.'s (NYSE:BBAI) P/S ratio of 2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for BigBear.ai Holdings

What Does BigBear.ai Holdings' Recent Performance Look Like?

BigBear.ai Holdings could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For BigBear.ai Holdings?

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

Retrospectively, the last year delivered a decent 4.6% gain to the company's revenues. The latest three year period has also seen an excellent 70% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 12% per year during the coming three years according to the five analysts following the company. That's shaping up to be similar to the 14% per annum growth forecast for the broader industry.

With this information, we can see why BigBear.ai Holdings is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From BigBear.ai Holdings' P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A BigBear.ai Holdings' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the IT industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for BigBear.ai Holdings that you should be aware of.

If these risks are making you reconsider your opinion on BigBear.ai Holdings, 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.