BILL Holdings, Inc.'s (NYSE:BILL) Shares Bounce 27% But Its Business Still Trails The Industry

BILL Holdings, Inc. (NYSE:BILL) shares have had a really impressive month, gaining 27% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 4.4% in the last twelve months.

Even after such a large jump in price, BILL Holdings may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 3.6x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 5.2x and even P/S higher than 12x 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 limited.

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Check out our latest analysis for BILL Holdings

How BILL Holdings Has Been Performing

BILL Holdings could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like BILL Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. Pleasingly, revenue has also lifted 128% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 13% per year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 36% each year growth forecast for the broader industry.

In light of this, it's understandable that BILL Holdings' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Despite BILL Holdings' share price climbing recently, its P/S still lags most other companies. 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.

As expected, our analysis of BILL Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Plus, you should also learn about this 1 warning sign we've spotted with BILL Holdings.

If you're unsure about the strength of BILL Holdings' 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.