CHONGQING, CHINA – APRIL 26: In this photo illustration, the logo of BigBear.ai Holdings, Inc. is displayed on a smartphone screen, with the company’s latest stock market chart visible in the background, reflecting recent trading activity and market sentiment, on April 26, 2025, in Chongqing, China. BigBear.ai is an American artificial intelligence company that provides data analytics and decision intelligence solutions for government and commercial customers. (Photo illustration by Cheng Xin/Getty Images)
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Following a disappointing quarter reported on August 11, BigBear.ai (NYSE:BBAI), a provider of AI solutions focused on national security, experienced a nearly 30% decline in its stock during after-hours trading. The company’s sales decreased by 18% compared to the previous year, falling short of consensus expectations by over 20% due to reduced volume in particular U.S. Army programs. Furthermore, the company’s net loss widened, and it retracted its full-year adjusted EBITDA guidance while revising its revenue forecast downwards, attributing these actions to disruptions in federal contracts.
In light of these events, the stock’s descent below $5 seems justifiable. Historically, following earnings announcements, the stock has posted negative returns in more than 85% of instances on a single-day basis, a trend we analyzed in a previous note. The pivotal question now is whether BBAI stock represents a wise investment after this downturn. We do not believe it does. Even with the recent fall, the stock remains unattractive due to several notable concerns, particularly its elevated valuation in comparison to its actual performance.
Our assessment is founded on an evaluation of BigBear.ai’s current valuation, its recent operational performance, and its historical financial health. An in-depth analysis of essential factors—including Growth, Profitability, Financial Stability, and Downturn Resilience—indicates that the company is characterized by weak operational performance and financial standing.
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How Does BigBear.ai’s Valuation Look vs. The S&P 500?
Based on the price paid per dollar of sales or profit, BBAI stock appears overpriced when assessed against the broader market. BigBear.ai shows a price-to-sales (P/S) ratio of 7.2, whereas the S&P 500 stands at 3.2.
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How Have BigBear.ai’s Revenues Grown Over Recent Years?
BigBear.ai’s Revenues have experienced a decline over the past few years.
- BigBear.ai has had its revenue expand at an average of 3.4% in the last 3 years (compared to a 5.7% rise for S&P 500)
- Moreover, its quarterly revenues dropped 18% to $32 million in the most recent quarter down from $40 million a year prior (versus a 5.2% increase for S&P 500)
How Profitable Is BigBear.ai?
BigBear.ai’s profit margins rank significantly lower than those of most companies within the Trefis coverage area.
- BigBear.ai’s Operating Income over the past four quarters was $-127 million, which equates to a very poor Operating Margin of -83% (compared to 18.6% for S&P 500)
- BigBear.ai’s Operating Cash Flow (OCF) during this time period was $-27 million, indicating a very poor OCF Margin of -17.9% (versus 20.3% for S&P 500)
- For the last four quarters, BigBear.ai’s Net Income was $-449 million — signaling a very poor Net Income Margin of -294.5% (in comparison to 12.7% for S&P 500)
Does BigBear.ai Look Financially Stable?
BigBear.ai’s balance sheet appears very robust.
- BigBear.ai’s Debt stood at $113 million at the end of the most recent quarter, while its market capitalization is $1.5 billion. This implies a very strong Debt-to-Equity Ratio of 7.7% (as compared to 21.8% for S&P 500). [Note: A lower Debt-to-Equity Ratio is preferable]
- Cash (including cash equivalents) constitutes $391 million of the $599 million in Total Assets for BigBear.ai. This results in a very strong Cash-to-Assets Ratio of 65.2% (versus 6.9% for S&P 500)
How Resilient Is BBAI Stock During A Downturn?
BBAI stock has performed significantly worse than the benchmark S&P 500 index during some recent downturns. While investors are hoping for a soft landing for the U.S. economy, how severe could the situation become if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.
Inflation Shock (2022)
- BBAI stock dropped 95.0% from a high of $12.69 on April 13, 2022, to $0.63 on December 29, 2022, whereas the S&P 500 experienced a peak-to-trough decline of 25.4%
- The stock has not yet returned to its pre-Crisis peak
- Since then, the highest the stock has reached is $9.78 on February 13, 2025, and it currently trades around $5
- Refer to – Buy or Sell BBAI Stock – for additional details.
Putting All The Pieces Together: What It Means For BBAI Stock
In conclusion, BigBear.ai’s performance across the aforementioned metrics is summarized as follows:
- Growth: Weak
- Profitability: Very Weak
- Financial Stability: Very Strong
- Downturn Resilience: Very Weak
- Overall: Weak
The Verdict
Overall, BigBear.ai’s performance has been lackluster across its key financial indicators. The increasing losses and withdrawal of guidance are unlikely to be positively received by investors. Moreover, the recent 30% decline doesn’t make the stock more affordable. BigBear.ai still trades at 7.2 times its trailing revenues, significantly higher than its average price-to-sales ratio of 3.3 over the past four years. We believe there could be further downside for the stock, and investors should proceed with caution.
Of course, we could be mistaken. Investors may be inclined to “buy the dip,” especially in light of the company’s substantial $380 million backlog and the growing demand for AI in the defense sector. Our insights on factors that could propel BBAI stock higher provide further details. However, the risk with investing in BBAI stock at this juncture appears to be very high. See, we implement a risk assessment framework while building the 30-stock Trefis High Quality (HQ) Portfolio, which has a history of consistently outperforming the S&P 500 over the last four years. Why is that? Collectively, HQ Portfolio stocks have offered superior returns with lower risk compared to the benchmark index; less of a roller-coaster experience, as demonstrated in HQ Portfolio performance metrics.