Market Participants Recognise Core Scientific, Inc.'s (NASDAQ:CORZ) Revenues Pushing Shares 27% Higher

Core Scientific, Inc. (NASDAQ:CORZ) shares have had a really impressive month, gaining 27% after a shaky period beforehand. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Following the firm bounce in price, when almost half of the companies in the United States' IT industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider Core Scientific as a stock not worth researching with its 5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Core Scientific

What Does Core Scientific's Recent Performance Look Like?

Recent revenue growth for Core Scientific has been in line with the industry. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Core Scientific.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Core Scientific would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.2%. The latest three year period has also seen an excellent 253% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 12% over the next year. With the industry only predicted to deliver 9.1%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Core Scientific's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Core Scientific's P/S Mean For Investors?

Shares in Core Scientific have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Our look into Core Scientific shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Core Scientific (of which 1 makes us a bit uncomfortable!) you should know about.

If these risks are making you reconsider your opinion on Core Scientific, 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.