TeraWulf Inc. (NASDAQ:WULF) Stocks Shoot Up 27% But Its P/S Still Looks Reasonable

TeraWulf Inc. (NASDAQ:WULF) shares have continued their recent momentum with a 27% gain in the last month alone. The last month tops off a massive increase of 150% in the last year.

Since its price has surged higher, TeraWulf may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 31.6x, when you consider almost half of the companies in the Software industry in the United States have P/S ratios under 5.5x and even P/S lower than 2x 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 lofty.

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View our latest analysis for TeraWulf

What Does TeraWulf's Recent Performance Look Like?

Recent revenue growth for TeraWulf has been in line with the industry. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think TeraWulf's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For TeraWulf?

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

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. 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.

Turning to the outlook, the next three years should generate growth of 85% per year as estimated by the twelve analysts watching the company. That's shaping up to be materially higher than the 37% each year growth forecast for the broader industry.

With this in mind, it's not hard to understand why TeraWulf's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Shares in TeraWulf have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into TeraWulf shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with TeraWulf, and understanding these should be part of your investment process.

If you're unsure about the strength of TeraWulf'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.