UroGen Pharma Ltd. (NASDAQ:URGN) shareholders would be excited to see that the share price has had a great month, posting a 84% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 16% over that time.

In spite of the firm bounce in price, there still wouldn't be many who think UroGen Pharma's price-to-sales (or "P/S") ratio of 6.8x is worth a mention when the median P/S in the United States' Biotechs industry is similar at about 8.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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

Recent times haven't been great for UroGen Pharma as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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.

Is There Some Revenue Growth Forecasted For UroGen Pharma?

UroGen Pharma's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.0% last year. This was backed up an excellent period prior to see revenue up by 70% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 66% each year over the next three years. With the industry predicted to deliver 105% growth per year, the company is positioned for a weaker revenue result.

With this information, we find it interesting that UroGen Pharma is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

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

UroGen Pharma appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look at the analysts forecasts of UroGen Pharma's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you settle on your opinion, we've discovered 2 warning signs for UroGen Pharma that you should be aware of.

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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