Taylor Devices, Inc.'s (NASDAQ:TAYD) Shares Leap 26% Yet They're Still Not Telling The Full Story

Taylor Devices, Inc. (NASDAQ:TAYD) shares have continued their recent momentum with a 26% gain in the last month alone. Looking further back, the 10% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, there still wouldn't be many who think Taylor Devices' 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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Earnings have risen at a steady rate over the last year for Taylor Devices, which is generally not a bad outcome. It might be that many expect the respectable earnings performance to only match most other companies over the coming period, which has kept the P/E from rising. 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.

View 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?

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

Taking a look back first, we see that the company managed to grow earnings per share by a handy 4.6% last year. Pleasingly, EPS has also lifted 1,066% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 13% shows it's noticeably more attractive on an annualised basis.

In light of this, it's curious that Taylor Devices' P/E sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Taylor Devices' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

Our examination of Taylor Devices 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.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Taylor Devices with six simple checks on some of these key factors.

You might be able to find a better investment than Taylor Devices. 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.