To the annoyance of some shareholders, Digital Turbine, Inc. (NASDAQ:APPS) shares are down a considerable 25% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 84% share price decline.

Since its price has dipped substantially, Digital Turbine may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.4x and even P/S higher than 11x 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 so limited.

See our latest analysis for Digital Turbine

What Does Digital Turbine's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Digital Turbine's revenue has gone into reverse gear, which is not great. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Digital Turbine.

Is There Any Revenue Growth Forecasted For Digital Turbine?

In order to justify its P/S ratio, Digital Turbine would need to produce anemic growth that's substantially trailing 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 19%. Even so, admirably revenue has lifted 122% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 3.8% per annum as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 15% each year, which is noticeably more attractive.

In light of this, it's understandable that Digital Turbine's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Digital Turbine's P/S

Shares in Digital Turbine have plummeted and its P/S has followed suit. 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 we suspected, our examination of Digital Turbine's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Digital Turbine that you should be aware of.

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).

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.