Axcelis Technologies, Inc. (NASDAQ:ACLS) Stock Catapults 28% Though Its Price And Business Still Lag The Market

Axcelis Technologies, Inc. (NASDAQ:ACLS) shares have continued their recent momentum with a 28% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 49% in the last twelve months.

Even after such a large jump in price, Axcelis Technologies' price-to-earnings (or "P/E") ratio of 13x might still make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 19x and even P/E's above 33x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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While the market has experienced earnings growth lately, Axcelis Technologies' earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

Check out our latest analysis for Axcelis Technologies

Want the full picture on analyst estimates for the company? Then our free report on Axcelis Technologies will help you uncover what's on the horizon.

Is There Any Growth For Axcelis Technologies?

Axcelis Technologies' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a frustrating 28% decrease to the company's bottom line. Even so, admirably EPS has lifted 50% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to slump, contracting by 49% during the coming year according to the seven analysts following the company. With the market predicted to deliver 13% growth , that's a disappointing outcome.

In light of this, it's understandable that Axcelis Technologies' P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Bottom Line On Axcelis Technologies' P/E

Despite Axcelis Technologies' shares building up a head of steam, its P/E still lags most other companies. 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.

As we suspected, our examination of Axcelis Technologies' analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 1 warning sign for Axcelis Technologies that you need to take into consideration.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.