The UGI Corporation (NYSE:UGI) stock price rose 26%, but its business outlook also needs improvement

UGI Corporation (NYSE:UGI) Shareholders’ patience was rewarded with a 26% increase in the share price last month. The last 30 days bring the annual increase to a very strong 35%.

Despite the significant price increase, you can still consider UGI as an option when almost half of the companies operating in the United States gas utility industry have a price-to-sales ratio (or “P/S”) above 1.7x. The stock is tempting with its P/E ratio of 0.9 to try out. However, the P/S could be low for a reason and further research is needed to determine if it is justified.

Check out our latest analysis for UGI

What is UGI’s current performance?

While the industry has seen revenue growth recently, UGI’s revenue has gone into reverse, which isn’t great. It seems that many expect the poor sales performance to continue, which has depressed the price-to-earnings ratio. So while one might say the stock is cheap, investors will look for improvement before considering it a good value.

Want to find out how analysts think UGI’s future compares to the industry? In this case ours free The report is a good start.

How is UGI’s sales growth developing?

To justify its P/E ratio, UGI would have to deliver slow growth that lags the industry.

When we reviewed the last financial year, we were disheartened to see that the company’s revenue fell by about 19%. As a result, revenues from three years ago have also fallen by a total of 3.2%. Therefore, it’s fair to say that revenue growth has been undesirable for the company recently.

Sales are expected to grow 8.1% per year over the next three years, according to the three analysts who cover the company. This is likely to be well below the 21% per year forecast for the entire industry.

With this in mind, it’s understandable that UGI’s P/E ratio is lower than most other companies. Apparently many shareholders were uncomfortable holding on to the stock while the company potentially faces a less successful future.

What can we learn from UGI’s P/S?

Although UGI’s share price has risen recently, its P/E ratio still lags behind most other companies. We typically caution against reading too much into the price-to-sales ratio when making investment decisions, even though it can reveal a lot about what other market participants think about the company.

As expected, our analysis of UGI’s analyst forecasts confirms that the company’s disappointing revenue outlook is a major contributor to its low P/E ratio. For now, shareholders accept the low P/E ratio, acknowledging that future earnings are unlikely to hold any pleasant surprises. The company will need a reversal of fortune to justify a future increase in its P/E ratio.

We don’t want to spoil the parade too much, but we found it 3 warning signs for UGI (1 cannot be ignored!) that you need to pay attention to.

It is important Make sure you’re looking for a great company and not just the first idea you come across. So if increasing profitability fits your idea of ​​a great company, take a look free List of interesting companies with strong recent earnings growth (and a low P/E ratio).

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.