UroGen Pharma Ltd. (NASDAQ:URGN) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. Looking at the bigger picture, even after this poor month the stock is up 70% in the last year.

Since its price has dipped substantially, UroGen Pharma may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 6x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 15x and even P/S higher than 71x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

How UroGen Pharma Has Been Performing

With revenue growth that's inferior to most other companies of late, UroGen Pharma has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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.

Is There Any Revenue Growth Forecasted For UroGen Pharma?

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.

Taking a look back first, we see that the company grew revenue by an impressive 29% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 54% each year during the coming three years according to the five analysts following the company. With the industry predicted to deliver 202% growth per annum, the company is positioned for a weaker revenue result.

With this information, we can see why UroGen Pharma is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On UroGen Pharma's P/S

UroGen Pharma's P/S looks about as weak as its stock price lately. 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.

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. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware UroGen Pharma is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious.

If you're unsure about the strength of UroGen Pharma's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.