Market Participants Recognise Tenaz Energy Corp.'s (TSE:TNZ) Revenues Pushing Shares 36% Higher

Tenaz Energy Corp. (TSE:TNZ) shares have continued their recent momentum with a 36% gain in the last month alone. The annual gain comes to 172% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, given close to half the companies operating in Canada's Oil and Gas industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider Tenaz Energy as a stock to potentially avoid with its 3.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for Tenaz Energy

What Does Tenaz Energy's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Tenaz Energy has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 Tenaz Energy will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Tenaz Energy?

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

Taking a look back first, we see that the company grew revenue by an impressive 50% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 157% over the next year. With the industry only predicted to deliver 5.0%, the company is positioned for a stronger revenue result.

With this information, we can see why Tenaz Energy is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Tenaz Energy's P/S Mean For Investors?

Tenaz Energy shares have taken a big step in a northerly direction, but its P/S is elevated as a result. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Tenaz Energy shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Tenaz Energy, and understanding them should be part of your investment process.

If you're unsure about the strength of Tenaz Energy's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.