Super Micro Computer, Inc. (NASDAQ:SMCI) Stocks Shoot Up 62% But Its P/E Still Looks Reasonable

Despite an already strong run, Super Micro Computer, Inc. (NASDAQ:SMCI) shares have been powering on, with a gain of 62% in the last thirty days. The last 30 days were the cherry on top of the stock's 524% gain in the last year, which is nothing short of spectacular.

Following the firm bounce in price, Super Micro Computer may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 43.4x, since almost half of all companies in the United States have P/E ratios under 16x and even P/E's lower than 9x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Super Micro Computer has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Super Micro Computer

Keen to find out how analysts think Super Micro Computer's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Super Micro Computer's Growth Trending?

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

Retrospectively, the last year delivered an exceptional 35% gain to the company's bottom line. Pleasingly, EPS has also lifted 568% 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.

Looking ahead now, EPS is anticipated to climb by 26% per annum during the coming three years according to the nine analysts following the company. With the market only predicted to deliver 12% per annum, the company is positioned for a stronger earnings result.

With this information, we can see why Super Micro Computer is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Super Micro Computer's P/E

Shares in Super Micro Computer have built up some good momentum lately, which has really inflated its P/E. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Super Micro Computer's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 3 warning signs for Super Micro Computer that you need to take into consideration.

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.