UroGen Pharma Ltd. (NASDAQ:URGN) Looks Inexpensive After Falling 27% But Perhaps Not Attractive Enough

UroGen Pharma Ltd. (NASDAQ:URGN) shares have had a horrible month, losing 27% after a relatively good period beforehand. Looking at the bigger picture, even after this poor month the stock is up 41% in the last year.

After such a large drop in price, UroGen Pharma's price-to-sales (or "P/S") ratio of 5.4x might make it look like a strong buy right now compared to the wider Biotechs industry in the United States, where around half of the companies have P/S ratios above 13.4x and even P/S above 70x 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 so limited.

See our latest analysis for UroGen Pharma

How UroGen Pharma Has Been Performing

UroGen Pharma could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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?

The only time you'd be truly comfortable seeing a P/S as depressed as UroGen Pharma's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 29%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 54% per year during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 168% per annum, which is noticeably more attractive.

In light of this, it's understandable that UroGen Pharma's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Having almost fallen off a cliff, UroGen Pharma's share price has pulled its P/S way down as well. 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 expected, our analysis of UroGen Pharma's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - UroGen Pharma has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If these risks are making you reconsider your opinion on UroGen Pharma, 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.