Stronghold Digital Mining, Inc. (NASDAQ:SDIG) Shares Fly 27% But Investors Aren't Buying For Growth

Stronghold Digital Mining, Inc. (NASDAQ:SDIG) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

Even after such a large jump in price, Stronghold Digital Mining may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.3x and even P/S higher than 11x 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 so limited.

Check out our latest analysis for Stronghold Digital Mining

How Has Stronghold Digital Mining Performed Recently?

Stronghold Digital Mining could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Stronghold Digital Mining'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 Stronghold Digital Mining?

In order to justify its P/S ratio, Stronghold Digital Mining would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 13% 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. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Looking ahead now, revenue is anticipated to climb by 7.5% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 14%, which is noticeably more attractive.

In light of this, it's understandable that Stronghold Digital Mining's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Stronghold Digital Mining's P/S

Stronghold Digital Mining's recent share price jump still sees fails to bring its P/S alongside the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Stronghold Digital Mining's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 6 warning signs for Stronghold Digital Mining (3 don't sit too well with us!) that you need to take into consideration.

If you're unsure about the strength of Stronghold Digital Mining'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.