After Leaping 27% AIXTRON SE (ETR:AIXA) Shares Are Not Flying Under The Radar
AIXTRON SE (ETR:AIXA) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 31%.
After such a large jump in price, AIXTRON may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 32.3x, since almost half of all companies in Germany have P/E ratios under 16x and even P/E's lower than 9x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.
Recent times have been pleasing for AIXTRON as its earnings have risen in spite of the market's earnings going into reverse. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.
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Is There Enough Growth For AIXTRON?
The only time you'd be truly comfortable seeing a P/E as steep as AIXTRON's is when the company's growth is on track to outshine the market decidedly.
Retrospectively, the last year delivered an exceptional 28% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 496% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Turning to the outlook, the next three years should generate growth of 21% per year as estimated by the twelve analysts watching the company. That's shaping up to be materially higher than the 13% per year growth forecast for the broader market.
With this information, we can see why AIXTRON is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Key Takeaway
Shares in AIXTRON have built up some good momentum lately, which has really inflated its P/E. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
As we suspected, our examination of AIXTRON's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.
You should always think about risks. Case in point, we've spotted 2 warning signs for AIXTRON you should be aware of.
If these risks are making you reconsider your opinion on AIXTRON, 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.
