HIVE Digital Technologies Ltd.'s (CVE:HIVE) 25% Jump Shows Its Popularity With Investors

The HIVE Digital Technologies Ltd. (CVE:HIVE) share price has done very well over the last month, posting an excellent gain of 25%. The last month tops off a massive increase of 114% in the last year.

Since its price has surged higher, when almost half of the companies in Canada's Software industry have price-to-sales ratios (or "P/S") below 3.3x, you may consider HIVE Digital Technologies as a stock probably not worth researching with its 4.3x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for HIVE Digital Technologies

How HIVE Digital Technologies Has Been Performing

HIVE Digital Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on HIVE Digital Technologies will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The High P/S?

HIVE Digital Technologies' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 59%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 164% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 30% during the coming year according to the dual analysts following the company. With the industry only predicted to deliver 19%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that HIVE Digital Technologies' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From HIVE Digital Technologies' P/S?

The large bounce in HIVE Digital Technologies' shares has lifted the company's P/S handsomely. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into HIVE Digital Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 3 warning signs for HIVE Digital Technologies (1 is a bit concerning!) that you need to be mindful of.

If these risks are making you reconsider your opinion on HIVE Digital Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.