Energy Fuels Inc. (TSE:EFR) Stocks Shoot Up 28% But Its P/S Still Looks Reasonable

Energy Fuels Inc. (TSE:EFR) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 27% over that time.

After such a large jump in price, you could be forgiven for thinking Energy Fuels is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 19.9x, considering almost half the companies in Canada's Oil and Gas industry have P/S ratios below 1.9x. 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.

See our latest analysis for Energy Fuels

How Energy Fuels Has Been Performing

Energy Fuels certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Energy Fuels will help you uncover what's on the horizon.

How Is Energy Fuels' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Energy Fuels' is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 54% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 95% each year during the coming three years according to the three analysts following the company. With the industry only predicted to deliver 1.3% each year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Energy Fuels' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Energy Fuels' P/S?

The strong share price surge has lead to Energy Fuels' P/S soaring as well. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into Energy Fuels shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Energy Fuels.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.