Nasdaq
華爾街日報After Leaping 26% TAT Technologies Ltd. (NASDAQ:TATT) Shares Are Not Flying Under The Radar
TAT Technologies Ltd. (NASDAQ:TATT) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 87% in the last year.
Since its price has surged higher, TAT Technologies may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 40.7x, since almost half of all companies in the United States have P/E ratios under 19x and even P/E's lower than 11x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
TAT Technologies certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.
Check out our latest analysis for TAT Technologies
What Are Growth Metrics Telling Us About The High P/E?
In order to justify its P/E ratio, TAT Technologies would need to produce outstanding growth well in excess of the market.
Retrospectively, the last year delivered an exceptional 75% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Turning to the outlook, the next year should generate growth of 26% as estimated by the five analysts watching the company. With the market only predicted to deliver 16%, the company is positioned for a stronger earnings result.
With this information, we can see why TAT Technologies 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 Final Word
Shares in TAT Technologies have built up some good momentum lately, which has really inflated its P/E. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
As we suspected, our examination of TAT Technologies' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.
It is also worth noting that we have found 1 warning sign for TAT Technologies that you need to take into consideration.
You might be able to find a better investment than TAT Technologies. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.