Taylor Devices, Inc. (NASDAQ:TAYD) Stock Rockets 27% But Many Are Still Ignoring The Company

Despite an already strong run, Taylor Devices, Inc. (NASDAQ:TAYD) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 154% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, there still wouldn't be many who think Taylor Devices' price-to-earnings (or "P/E") ratio of 17.7x is worth a mention when the median P/E in the United States is similar at about 17x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's exceedingly strong of late, Taylor Devices has been doing very well. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. 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 not quite in favour.

See our latest analysis for Taylor Devices

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 Taylor Devices' earnings, revenue and cash flow.

Is There Some Growth For Taylor Devices?

The only time you'd be comfortable seeing a P/E like Taylor Devices' is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 90%. The strong recent performance means it was also able to grow EPS by 233% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 11% shows it's noticeably more attractive on an annualised basis.

With this information, we find it interesting that Taylor Devices is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Its shares have lifted substantially and now Taylor Devices' P/E is also back up to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Taylor Devices currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you take the next step, you should know about the 1 warning sign for Taylor Devices that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.