Further Upside For Optex Systems Holdings, Inc (NASDAQ:OPXS) Shares Could Introduce Price Risks After 26% Bounce

Optex Systems Holdings, Inc (NASDAQ:OPXS) shareholders have had their patience rewarded with a 26% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 69% in the last year.

Although its price has surged higher, there still wouldn't be many who think Optex Systems Holdings' price-to-earnings (or "P/E") ratio of 17.6x is worth a mention when the median P/E in the United States is similar at about 19x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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The earnings growth achieved at Optex Systems Holdings over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

See our latest analysis for Optex Systems Holdings

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 Optex Systems Holdings' earnings, revenue and cash flow.

Is There Some Growth For Optex Systems Holdings?

There's an inherent assumption that a company should be matching the market for P/E ratios like Optex Systems Holdings' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 21%. Pleasingly, EPS has also lifted 1,039% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 15% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Optex Systems Holdings' P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Optex Systems Holdings' P/E?

Optex Systems Holdings' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Optex Systems Holdings revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Optex Systems Holdings that you should be aware of.

Of course, you might also be able to find a better stock than Optex Systems Holdings. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.