Lacklustre Performance Is Driving UroGen Pharma Ltd.'s (NASDAQ:URGN) 30% Price Drop

The UroGen Pharma Ltd. (NASDAQ:URGN) share price has fared very poorly over the last month, falling by a substantial 30%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 45% in that time.

After such a large drop in price, UroGen Pharma may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 3.7x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 8x and even P/S higher than 45x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

We've discovered 3 warning signs about UroGen Pharma. View them for free.

Check out our latest analysis for UroGen Pharma

What Does UroGen Pharma's P/S Mean For Shareholders?

UroGen Pharma could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is UroGen Pharma's Revenue Growth Trending?

UroGen Pharma's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a decent 9.0% gain to the company's revenues. Pleasingly, revenue has also lifted 70% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 65% each year during the coming three years according to the eight analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 164% each year, which is noticeably more attractive.

With this information, we can see why UroGen Pharma is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On UroGen Pharma's P/S

Shares in UroGen Pharma have plummeted and its P/S has followed suit. 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.

We've established that UroGen Pharma maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 3 warning signs for UroGen Pharma (1 is concerning!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.