The Argo Blockchain (LSE: ARB) share price has been on a wild ride this year. Since the beginning of the year, the stock has added nearly 200%. And over the past 12 months, it’s up almost 2,000%.
However, these figures mask significant volatility. Between the beginning of 2021 and the middle of February, the stock added more than 500%. Then between the middle of February and middle of July, it lost 70%.
After it fell to a low of around 65p on 20 July, the stock has gone on to gain 64%. Today, it’s changing hands at 141p.
When interpreting all of the above figures, investors should keep in mind that past performance should never be used to guide future potential.
Whenever I’ve covered the Argo Blockchain share price, I’ve tried to clarify that while I think the company offers an exciting proposition, it’s been too challenging for me to value the stock. As such, I’ve always avoided it.
Still, the firm is getting closer and closer to profitability. I’m now wondering if it could be time to buy the stock ahead of a sudden upswing.
The outlook for the Argo Blockchain share price
Generally, I stay away from early-stage companies. These tend to be small-caps yet to report a profit. I stay away because these companies are incredibly speculative, and it’s impossible to pick winners at these early stages.
This is the main reason why I’ve stayed away from Argo so far. Put simply, I’ve been waiting for the company to show more progress with its mining and growth plans.
We’re now starting to see tangible results from the company. According to its results for the six months to the end of June, the cryptocurrency miner’s revenues increased by 180% to £31m. Earnings before interest, tax, depreciation and amortisation jumped 332% to £16m. Overall, the firm reported a pre-tax profit of £10.7m.
Based on these figures, the Argo Blockchain share price is selling at a forward price-to-earnings (P/E) multiple of 37. That’s assuming the firm repeats the first-half performance in the second half.
This multiple doesn’t look too expensive. Moreover, it doesn’t take into account future growth. The firm’s planning a significant expansion of its mining capacity beginning the fourth quarter of 2021. This increased capacity, coupled with the rising Bitcoin price, could help the business achieve an even better performance in the second half.
Based on the above, I think there’s a strong probability the Argo Blockchain share price could rally in the second half of the year as group profits grow.
Unfortunately, this is far from guaranteed. The Bitcoin price is highly volatile. If it falls substantially, Argo’s profits could follow suit. There could also be a significant increase in the global Bitcoin mining hash rate. This would make it harder to mine the cryptocurrency and reduce profitability.
Despite these risks, I think the company’s making real progress. As such, I reckon the outlook for the Argo Blockchain share price is improving.
Still, I’m not going to buy the stock until its valuation becomes more attractive.
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The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
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.