After Leaping 35% Marathon Digital Holdings, Inc. (NASDAQ:MARA) Shares Are Not Flying Under The Radar

Marathon Digital Holdings, Inc. (NASDAQ:MARA) shareholders are no doubt pleased to see that the share price has bounced 35% in the last month, although it is still struggling to make up recently lost ground. The annual gain comes to 131% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, Marathon Digital Holdings may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 12.1x, since almost half of all companies in the Software industry in the United States have P/S ratios under 4.5x and even P/S lower than 1.7x are not unusual. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Marathon Digital Holdings

How Has Marathon Digital Holdings Performed Recently?

With revenue growth that's superior to most other companies of late, Marathon Digital Holdings has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Marathon Digital Holdings' 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 High P/S?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Marathon Digital Holdings' to be considered reasonable.

Retrospectively, the last year delivered an explosive gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 52% during the coming year according to the eight analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 15%, which is noticeably less attractive.

In light of this, it's understandable that Marathon Digital Holdings' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Marathon Digital Holdings' P/S

Marathon Digital Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Marathon Digital Holdings 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.

Plus, you should also learn about these 4 warning signs we've spotted with Marathon Digital Holdings.

If these risks are making you reconsider your opinion on Marathon Digital Holdings, 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.