Coinbase’s stock is up over 40% this month as Wall Street projects amazing profit growth

Through Thursday, shares of Coinbase Global Inc. had risen nearly 45% in June. It might seem at first to be an expensive stock, but consensus estimates make the case that committed investors may be well rewarded several years from now.

One reason Coinbase

COIN

+0.38%

has soared this month is that the stock was added to the S&P 500

SPX

+0.83%

in May. This means index funds such as the $630 billion SPDR S&P 500 Trust

SPY

+0.79%

and the $1.4 trillion Vanguard S&P 500 ETF

VOO

+0.86%

have been buying the shares.

The provider of services for people who invest and trade in bitcoin

BTCUSD

+0.07%

and other virtual currencies is expected by analysts polled by FactSet to earn $5.28 a share this year on revenue of $7.37 billion. Those figures are expected to rise to EPS of $7.80 on sales of $8.15 billion in 2026, and EPS of $9.04 on sales of $8.83 billion in 2027.

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The most commonly cited stock-valuation metric is forward price-to-earnings ratio; this is a company’s share price divided by the consensus earnings-per-share estimate for the next 12 months. On this basis, Coinbase appears to be expensive: At Thursday’s close, its forward P/E ratio was 57.7, compared with a weighted forward P/E of 22 for the S&P 500.

We can also look at price-to-sales ratios on the same rolling 12-month bases. Coinbase’s forward P/S ratio was 11.7, compared with a weighted P/S ratio of 3 for the index.

Now let’s take a look at projected compound annual growth rates (CAGR) for Coinbase and the S&P 500. These are based on consensus estimates among analysts working for brokerage and research firms polled by FactSet, weighted for the index by market capitalization