Galaxy Digital Inc.'s (NASDAQ:GLXY) Shares Leap 54% Yet They're Still Not Telling The Full Story

Galaxy Digital Inc. (NASDAQ:GLXY) shares have continued their recent momentum with a 54% gain in the last month alone. The annual gain comes to 185% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, Galaxy Digital may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2x, since almost half of all companies in the Capital Markets industry in the United States have P/S ratios greater than 4.1x and even P/S higher than 12x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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View our latest analysis for Galaxy Digital

What Does Galaxy Digital's Recent Performance Look Like?

Galaxy Digital hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Is There Any Revenue Growth Forecasted For Galaxy Digital?

The only time you'd be truly comfortable seeing a P/S as depressed as Galaxy Digital's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 83% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 200% per year during the coming three years according to the twelve analysts following the company. That's shaping up to be materially higher than the 11% each year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Galaxy Digital's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Galaxy Digital's recent share price jump still sees fails to bring its P/S alongside the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Galaxy Digital'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 3 warning signs with Galaxy Digital (at least 1 which is a bit concerning), and understanding them should be part of your investment process.

If you're unsure about the strength of Galaxy Digital's 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.