Revenues Tell The Story For enCore Energy Corp. (CVE:EU) As Its Stock Soars 33%

Those holding enCore Energy Corp. (CVE:EU) shares would be relieved that the share price has rebounded 33% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 66% share price drop in the last twelve months.

Since its price has surged higher, given around half the companies in Canada's Oil and Gas industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider enCore Energy as a stock to avoid entirely with its 5.1x 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.

We've discovered 2 warning signs about enCore Energy. View them for free.

Check out our latest analysis for enCore Energy

How enCore Energy Has Been Performing

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

Is There Enough Revenue Growth Forecasted For enCore Energy?

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

Retrospectively, the last year delivered an exceptional 163% gain to the company's top line. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 49% per year over the next three years. That's shaping up to be materially higher than the 2.4% per year growth forecast for the broader industry.

In light of this, it's understandable that enCore Energy's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

enCore Energy's P/S has grown nicely over the last month thanks to a handy boost in the share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into enCore 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. It's hard to see the share price falling strongly in the near future under these circumstances.

You need to take note of risks, for example - enCore Energy has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.