Yahoo Finance Bitcoin Well Inc. (CVE:BTCW) Stock Catapults 29% Though Its Price And Business Still Lag The Industry
Bitcoin Well Inc. (CVE:BTCW) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Looking further back, the 13% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.
Even after such a large jump in price, Bitcoin Well's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a strong buy right now compared to the wider Software industry in Canada, where around half of the companies have P/S ratios above 3.3x and even P/S above 10x 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.
See our latest analysis for Bitcoin Well
How Bitcoin Well Has Been Performing
Bitcoin Well 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. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.
Keen to find out how analysts think Bitcoin Well's 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?
The only time you'd be truly comfortable seeing a P/S as depressed as Bitcoin Well's is when the company's growth is on track to lag the industry decidedly.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.8%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 14% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.
Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 91% as estimated by the lone analyst watching the company. Meanwhile, the broader industry is forecast to expand by 19%, which paints a poor picture.
With this in consideration, we find it intriguing that Bitcoin Well's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.
The Key Takeaway
Shares in Bitcoin Well have risen appreciably however, its P/S is still subdued. 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.
It's clear to see that Bitcoin Well maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Bitcoin Well's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.
And what about other risks? Every company has them, and we've spotted 6 warning signs for Bitcoin Well (of which 5 shouldn't be ignored!) you should know about.
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.
