Even With A 26% Surge, Cautious Investors Are Not Rewarding Argo Blockchain plc's (LON:ARB) Performance Completely

Argo Blockchain plc (LON:ARB) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Unfortunately, despite the strong performance over the last month, the full year gain of 9.1% isn't as attractive.

In spite of the firm bounce in price, Argo Blockchain may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.6x, considering almost half of all companies in the Software industry in the United Kingdom have P/S ratios greater than 2.5x and even P/S higher than 5x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Argo Blockchain

How Has Argo Blockchain Performed Recently?

Argo Blockchain's revenue growth of late has been pretty similar to most other companies. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Argo Blockchain?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Argo Blockchain's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. This was backed up an excellent period prior to see revenue up by 51% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 15% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 12%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Argo Blockchain's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Argo Blockchain's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Argo Blockchain's P/S close to the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A look at Argo Blockchain's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Argo Blockchain (at least 1 which is significant), and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on Argo Blockchain, 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.

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