Marathon Digital Holdings, Inc.'s (NASDAQ:MARA) P/S Is Still On The Mark Following 47% Share Price Bounce

The Marathon Digital Holdings, Inc. (NASDAQ:MARA) share price has done very well over the last month, posting an excellent gain of 47%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 43% over that time.

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 17x, since almost half of all companies in the Software industry in the United States have P/S ratios under 4.4x and even P/S lower than 1.9x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Marathon Digital Holdings

What Does Marathon Digital Holdings' Recent Performance Look Like?

Marathon Digital Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. 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 Marathon Digital Holdings.

Is There Enough Revenue Growth Forecasted For Marathon Digital Holdings?

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

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 68% each year over the next three years. With the industry only predicted to deliver 13% per year, the company is positioned for a stronger revenue result.

With this information, we can see why Marathon Digital Holdings is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Marathon Digital Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Marathon Digital Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 3 warning signs we've spotted with Marathon Digital Holdings (including 2 which are potentially serious).

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.