HIVE Digital Technologies Ltd. (CVE:HIVE) Might Not Be As Mispriced As It Looks After Plunging 30%

To the annoyance of some shareholders, HIVE Digital Technologies Ltd. (CVE:HIVE) shares are down a considerable 30% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 47% in that time.

Although its price has dipped substantially, it's still not a stretch to say that HIVE Digital Technologies' price-to-sales (or "P/S") ratio of 2.8x right now seems quite "middle-of-the-road" compared to the Software industry in Canada, where the median P/S ratio is around 2.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for HIVE Digital Technologies

How HIVE Digital Technologies Has Been Performing

Recent times have been advantageous for HIVE Digital Technologies as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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 not quite in favour.

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

Is There Some Revenue Growth Forecasted For HIVE Digital Technologies?

The only time you'd be comfortable seeing a P/S like HIVE Digital Technologies' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 38% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 58% each year as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 18% each year, which is noticeably less attractive.

In light of this, it's curious that HIVE Digital Technologies' P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

With its share price dropping off a cliff, the P/S for HIVE Digital Technologies looks to be in line with the rest of the Software industry. 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.

We've established that HIVE Digital Technologies currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for HIVE Digital Technologies that you should be aware of.

If you're unsure about the strength of HIVE Digital Technologies' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.