Investors Interested In Ur-Energy Inc.'s (TSE:URE) Revenues

When you see that almost half of the companies in the Oil and Gas industry in Canada have price-to-sales ratios (or "P/S") below 2.2x, Ur-Energy Inc. (TSE:URE) looks to be giving off strong sell signals with its 28.5x 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 so lofty.

Check out our latest analysis for Ur-Energy

How Ur-Energy Has Been Performing

Ur-Energy 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ur-Energy.

Is There Enough Revenue Growth Forecasted For Ur-Energy?

In order to justify its P/S ratio, Ur-Energy would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. The amazing performance means it was also able to grow revenue by 113% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 107% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.7% per annum, which is noticeably less attractive.

With this in mind, it's not hard to understand why Ur-Energy's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

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

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Ur-Energy maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Oil and Gas industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 2 warning signs for Ur-Energy (1 doesn't sit too well with us!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.