To the annoyance of some shareholders, Blue Hat Interactive Entertainment Technology (NASDAQ:BHAT) shares are down a considerable 31% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 77% loss during that time.

Since its price has dipped substantially, Blue Hat Interactive Entertainment Technology may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Entertainment industry in the United States have P/S ratios greater than 1.4x and even P/S higher than 5x 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.

How Has Blue Hat Interactive Entertainment Technology Performed Recently?

With revenue growth that's exceedingly strong of late, Blue Hat Interactive Entertainment Technology has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For Blue Hat Interactive Entertainment Technology?

In order to justify its P/S ratio, Blue Hat Interactive Entertainment Technology would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Pleasingly, revenue has also lifted 200% in aggregate from three years ago, thanks to the last 12 months of explosive growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 11% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Blue Hat Interactive Entertainment Technology's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Blue Hat Interactive Entertainment Technology's P/S has taken a dip along with its share price. 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.

Our examination of Blue Hat Interactive Entertainment Technology revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

Before you settle on your opinion, we've discovered 5 warning signs for Blue Hat Interactive Entertainment Technology (4 are potentially serious!) that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.