Stock Analysis

Corcept Therapeutics Incorporated (NASDAQ:CORT) Looks Just Right With A 25% Price Jump

NasdaqCM:CORT
Source: Shutterstock

Corcept Therapeutics Incorporated (NASDAQ:CORT) shares have continued their recent momentum with a 25% gain in the last month alone. The last month tops off a massive increase of 126% in the last year.

Since its price has surged higher, given close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 19x, you may consider Corcept Therapeutics as a stock to avoid entirely with its 44.5x 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 so lofty.

With earnings growth that's superior to most other companies of late, Corcept Therapeutics has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Corcept Therapeutics

pe-multiple-vs-industry
NasdaqCM:CORT Price to Earnings Ratio vs Industry December 4th 2024
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Corcept Therapeutics.

What Are Growth Metrics Telling Us About The High P/E?

In order to justify its P/E ratio, Corcept Therapeutics would need to produce outstanding growth well in excess of the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 57% last year. The strong recent performance means it was also able to grow EPS by 46% 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.

Turning to the outlook, the next three years should generate growth of 48% per annum as estimated by the five analysts watching the company. With the market only predicted to deliver 11% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Corcept Therapeutics is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The strong share price surge has got Corcept Therapeutics' P/E rushing to great heights as well. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Corcept Therapeutics' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Corcept Therapeutics with six simple checks will allow you to discover any risks that could be an issue.

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

New: AI Stock Screener & Alerts

Our new AI Stock Screener scans the market every day to uncover opportunities.

• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies

Or build your own from over 50 metrics.

Explore Now for Free

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

About NasdaqCM:CORT

Corcept Therapeutics

Engages in discovery and development of drugs for the treatment of severe endocrinologic, oncologic, metabolic, and neurologic disorders in the United States.

Flawless balance sheet with high growth potential.

Community Narratives

Priced for AI perfection - cracks are emerging
Fair Value US$90.15|47.31% overvalued
ChadWisperer
ChadWisperer
Community Contributor
NVDA Market Outlook
Fair Value US$341.12|61.068999999999996% undervalued
NateF
NateF
Community Contributor
Karoon Energy (ASX:KAR) - Buy Baby Buy 🚀
Fair Value AU$5.10|70.392% undervalued
StockMan
StockMan
Community Contributor