TeraWulf Inc. (NASDAQ:WULF) shares have had a really impressive month, gaining 101% after a shaky period beforehand. The last month tops off a massive increase of 146% in the last year.

Since its price has surged higher, TeraWulf may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 13.9x, since almost half of all companies in the Software industry in the United States have P/S ratios under 4.1x and even P/S lower than 1.6x are not unusual. 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.

What Does TeraWulf's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, TeraWulf has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is TeraWulf's Revenue Growth Trending?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 88% during the coming year according to the five analysts following the company. That's shaping up to be materially higher than the 14% growth forecast for the broader industry.

With this information, we can see why TeraWulf 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.

What Does TeraWulf's P/S Mean For Investors?

The strong share price surge has lead to TeraWulf's P/S soaring as well. 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 TeraWulf 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 the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 4 warning signs for TeraWulf (1 is significant!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

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