HIVE Digital Technologies Ltd.'s (CVE:HIVE) Shares Leap 36% Yet They're Still Not Telling The Full Story

HIVE Digital Technologies Ltd. (CVE:HIVE) shareholders are no doubt pleased to see that the share price has bounced 36% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 21% in the last twelve months.

Even after such a large jump in price, HIVE Digital Technologies' price-to-sales (or "P/S") ratio of 2.4x might still make it look like a buy right now compared to the Software industry in Canada, where around half of the companies have P/S ratios above 3.1x and even P/S above 8x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

View our latest analysis for HIVE Digital Technologies

What Does HIVE Digital Technologies' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, HIVE Digital Technologies has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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.

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

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

Retrospectively, the last year delivered an exceptional 26% gain to the company's top line. Still, revenue has fallen 38% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 58% per annum during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 22% per year, which is noticeably less attractive.

With this information, we find it odd that HIVE Digital Technologies is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

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

Despite HIVE Digital Technologies' share price climbing recently, its P/S still lags most other companies. 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.

To us, it seems HIVE Digital Technologies currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

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.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.