Over the past 12 months, the Argo Blockchain (LSE: ARB) share price has been on a roller coaster ride. Since the beginning of 2021, the stock has fallen from 95p to around 84p. However, it peaked at 284p in the middle of February last year. Since then, investors have been steadily moving away from the enterprise.
It is difficult to understand why. As the share price has been falling, the company’s fundamentals have been improving. For the 2020 financial year, the cryptocurrency miner reported total revenues of £19m. This figure is expected to hit £82m in 2021 and £119m in 2022. And earnings per share are set to rise from 0.4p for 2021 to 10.8p for 2021 and 12.6p for 2022.
Argo Blockchain share price value
Based on these projections, the stock is currently dealing at a forward price-to-earnings (P/E) multiple of 7.5. This seems incredibly cheap compared to both the company’s growth and its international peers.
This ratio suggests the shares are trading at a PEG ratio of less than 0.5. Anything below one indicates the shares offer growth at a reasonable price.
At the same time, US-listed cryptocurrency trading companies are selling at earnings multiples of 40, or more.
Using these valuation metrics alone, I think there is a robust case to be made that the Argo Blockchain share price can double in value. I could go so far as to say that if the company’s primary listing was in the US, the stock could be worth many multiples of its current share price. The organisation already has a US listing of American depositary shares (ADS) listed on the Nasdaq.
So the company looks undervalued, its profits a growing, and it appears to have a bright future. With this being the case, I have to wonder why the stock has been falling.
It seems as if the market is worried about Argo’s growth plans. The corporation has been criticised for overpaying for land in Texas, which is required to build its new cryptocurrency mining facility.
It has also been criticised for issuing new shares to raise money for its expansion initiatives. As new shares are issued, existing shareholders are diluted. Issuing new shares can also significantly impact the earnings per share figure, as there are more shareholders to fight over each dollar of profit.
The bottom line
I think these twin headwinds are worth considering. If the company is overpaying for growth assets and asking shareholders to foot the bill, management could face pressure from investors.
The critical test will be whether or not the company can continue to grow. All indications suggest it can. So I would be happy to buy the stock for my portfolio as a speculative investment.
Considering the Argo Blockchain share price valuation and its growth potential over the next couple of years, I think this investment could be an attractive addition to my portfolio.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
