Revenues Tell The Story For Ur-Energy Inc. (TSE:URE) As Its Stock Soars 30%

Despite an already strong run, Ur-Energy Inc. (TSE:URE) shares have been powering on, with a gain of 30% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 43% in the last year.

Following the firm bounce in price, given around half the companies in Canada's Oil and Gas industry have price-to-sales ratios (or "P/S") below 2.4x, you may consider Ur-Energy as a stock to avoid entirely with its 14.2x 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.

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See our latest analysis for Ur-Energy

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

With revenue growth that's superior to most other companies of late, Ur-Energy has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Ur-Energy's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 149% 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.

Turning to the outlook, the next three years should generate growth of 63% per annum as estimated by the five analysts watching the company. With the industry only predicted to deliver 3.8% per annum, the company is positioned for a stronger revenue result.

With this information, we can see why Ur-Energy is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

The strong share price surge has lead to Ur-Energy's P/S soaring as well. 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.

As we suspected, our examination of Ur-Energy's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Ur-Energy (of which 1 is potentially serious!) you should know about.

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.

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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.