Energy Fuels Inc. (TSE:EFR) Looks Just Right With A 31% Price Jump

Energy Fuels Inc. (TSE:EFR) shares have continued their recent momentum with a 31% gain in the last month alone. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.2% in the last twelve months.

After such a large jump in price, given around half the companies in Canada's Oil and Gas industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider Energy Fuels as a stock to avoid entirely with its 37x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Energy Fuels

What Does Energy Fuels' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Energy Fuels has been relatively sluggish. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. If not, then existing shareholders may be very 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 Energy Fuels.

How Is Energy Fuels' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 2.7%. The latest three year period has seen an incredible overall rise in revenue, even though the last 12 month performance was only fair. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 103% per year during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 1.2% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Energy Fuels' 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 Bottom Line On Energy Fuels' P/S

Energy Fuels' P/S has grown nicely over the last month thanks to a handy boost in the share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Energy Fuels 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. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Energy Fuels you should know about.

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.