Ur-Energy Inc.'s (TSE:URE) Share Price Is Still Matching Investor Opinion Despite 33% Slump

The Ur-Energy Inc. (TSE:URE) share price has softened a substantial 33% over the previous 30 days, handing back much of the gains the stock has made lately. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 12%.

Even after such a large drop in price, when almost half of the companies in Canada's Oil and Gas industry have price-to-sales ratios (or "P/S") below 2.6x, you may still consider Ur-Energy as a stock not worth researching with its 12.5x 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.

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See our latest analysis for Ur-Energy

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

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.

Do Revenue Forecasts Match The High P/S Ratio?

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 139% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 57% each year over the next three years. With the industry only predicted to deliver 3.6% each year, 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. 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. 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.

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

Before you take the next step, you should know about the 3 warning signs for Ur-Energy (1 shouldn't be ignored!) that we have uncovered.

If these risks are making you reconsider your opinion on Ur-Energy, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.