Ur-Energy Inc.'s (TSE:URE) 26% Cheaper Price Remains In Tune With Revenues

To the annoyance of some shareholders, Ur-Energy Inc. (TSE:URE) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 16% in that time.

In spite of the heavy fall 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 still consider Ur-Energy as a stock to avoid entirely with its 23.5x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Ur-Energy

How Has Ur-Energy Performed Recently?

Recent times have been advantageous for Ur-Energy as its revenues have been rising faster than most other companies. 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.

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

How Is Ur-Energy's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 144% 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. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 112% per year as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 1.3% each year, which is noticeably less attractive.

With this information, we can see why Ur-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 Ur-Energy's P/S Mean For Investors?

A significant share price dive has done very little to deflate Ur-Energy's very lofty P/S. 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 Ur-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 the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Ur-Energy (1 is concerning) you should be aware of.

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.