Unfortunately for some shareholders, the BIT Mining Limited (NYSE:BTCM) share price has dived 26% in the last thirty days, prolonging recent pain.    Still, a bad month hasn't completely ruined the past year with the stock gaining 29%, which is great even in a bull market.  

Following the heavy fall in price, BIT Mining's price-to-sales (or "P/S") ratio of 0.8x might make it look like a strong buy right now compared to the wider Software industry in the United States, where around half of the companies have P/S ratios above 4.4x and even P/S above 11x are quite common.   Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.  

NYSE:BTCM Price to Sales Ratio vs Industry March 21st 2024

What Does BIT Mining's P/S Mean For Shareholders?

BIT Mining hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average.   Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon.  If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.    

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

How Is BIT Mining's Revenue Growth Trending?  

BIT Mining's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.  

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 93%.   In spite of this, the company still managed to deliver immense revenue growth over the last three years.  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 lone analyst covering the company suggest revenue should grow by 32% over the next year.  With the industry only predicted to deliver 15%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that BIT Mining's P/S sits below the majority of other companies.  Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.  

The Bottom Line On BIT Mining's P/S

Having almost fallen off a cliff, BIT Mining's share price has pulled its P/S way down as well.      Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

To us, it seems BIT Mining currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.    

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with BIT Mining (at least 2 which can't be ignored), and understanding them should be part of your investment process.  

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.