It's really great to see that even after a strong run, Cicor Technologies (VTX:CICN) shares have been powering on, with a gain of 30% in the last thirty days. And the full year gain of 40% isn't too shabby, either!
All else being equal, a sharp share price increase should make a stock less attractive to potential investors. While the market sentiment towards a stock is very changeable, in the long run, the share price will tend to move in the same direction as earnings per share. So some would prefer to hold off buying when there is a lot of optimism towards a stock. Perhaps the simplest way to get a read on investors' expectations of a business is to look at its Price to Earnings Ratio (PE Ratio). A high P/E implies that investors have high expectations of what a company can achieve compared to a company with a low P/E ratio.
Check out our latest analysis for Cicor Technologies
How Does Cicor Technologies's P/E Ratio Compare To Its Peers?
Cicor Technologies has a P/E ratio of 19.78. As you can see below Cicor Technologies has a P/E ratio that is fairly close for the average for the electronic industry, which is 21.2.
Its P/E ratio suggests that Cicor Technologies shareholders think that in the future it will perform about the same as other companies in its industry classification. If the company has better than average prospects, then the market might be underestimating it. I would further inform my view by checking insider buying and selling., among other things.
How Growth Rates Impact P/E Ratios
Earnings growth rates have a big influence on P/E ratios. When earnings grow, the 'E' increases, over time. And in that case, the P/E ratio itself will drop rather quickly. Then, a lower P/E should attract more buyers, pushing the share price up.
Cicor Technologies shrunk earnings per share by 2.2% last year. But over the longer term (5 years) earnings per share have increased by 8.5%.
A Limitation: P/E Ratios Ignore Debt and Cash In The Bank
It's important to note that the P/E ratio considers the market capitalization, not the enterprise value. Thus, the metric does not reflect cash or debt held by the company. In theory, a company can lower its future P/E ratio by using cash or debt to invest in growth.
Spending on growth might be good or bad a few years later, but the point is that the P/E ratio does not account for the option (or lack thereof).
So What Does Cicor Technologies's Balance Sheet Tell Us?
Net debt totals 16% of Cicor Technologies's market cap. This could bring some additional risk, and reduce the number of investment options for management; worth remembering if you compare its P/E to businesses without debt.