Why Investors Shouldn't Be Surprised By HIVE Digital Technologies Ltd.'s (CVE:HIVE) 28% Share Price Surge

HIVE Digital Technologies Ltd. (CVE:HIVE) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Looking back a bit further, it's encouraging to see the stock is up 28% in the last year.

Even after such a large jump in price, there still wouldn't be many who think HIVE Digital Technologies' price-to-sales (or "P/S") ratio of 3.7x is worth a mention when the median P/S in Canada's Software industry is similar at about 3.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for HIVE Digital Technologies

What Does HIVE Digital Technologies' Recent Performance Look Like?

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 not, then existing shareholders have reason to be feeling 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.

How Is HIVE Digital Technologies' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like HIVE Digital Technologies' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 44%. Revenue has also lifted 23% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 19% as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 20%, which is not materially different.

With this in mind, it makes sense that HIVE Digital Technologies' P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

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

HIVE Digital Technologies appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

A HIVE Digital Technologies' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Software industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for HIVE Digital Technologies you should be aware 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.

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.