Positive Sentiment Still Eludes urban-gro, Inc. (NASDAQ:UGRO) Following 29% Share Price Slump

The urban-gro, Inc. (NASDAQ:UGRO) share price has softened a substantial 29% over the previous 30 days, handing back much of the gains the stock has made lately. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 27% share price drop.

After such a large drop in price, urban-gro's price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Machinery industry in the United States, where around half of the companies have P/S ratios above 1.6x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for urban-gro

What Does urban-gro's Recent Performance Look Like?

Recent times haven't been great for urban-gro as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think urban-gro's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For urban-gro?

The only time you'd be truly comfortable seeing a P/S as low as urban-gro's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 7.6%. This was backed up an excellent period prior to see revenue up by 211% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 30% per year as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 8.0% per annum growth forecast for the broader industry.

With this information, we find it odd that urban-gro is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

urban-gro's P/S has taken a dip along with its share price. 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.

To us, it seems urban-gro currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about these 5 warning signs we've spotted with urban-gro.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.