The Market Lifts IBEX Technologies Inc. (CVE:IBT) Shares 27% But It Can Do More

Despite an already strong run, IBEX Technologies Inc. (CVE:IBT) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 66%.

Although its price has surged higher, given about half the companies in Canada have price-to-earnings ratios (or "P/E's") above 14x, you may still consider IBEX Technologies as an attractive investment with its 8.6x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's exceedingly strong of late, IBEX Technologies has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for IBEX Technologies

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on IBEX Technologies' earnings, revenue and cash flow.

Is There Any Growth For IBEX Technologies?

In order to justify its P/E ratio, IBEX Technologies would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 130%. Pleasingly, EPS has also lifted 287% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 17% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that IBEX Technologies is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On IBEX Technologies' P/E

The latest share price surge wasn't enough to lift IBEX Technologies' P/E close to the market median. 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.

Our examination of IBEX Technologies revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware IBEX Technologies is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable.

You might be able to find a better investment than IBEX 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.