TTM Technologies, Inc. (NASDAQ:TTMI) Stocks Shoot Up 30% But Its P/E Still Looks Reasonable

Despite an already strong run, TTM Technologies, Inc. (NASDAQ:TTMI) shares have been powering on, with a gain of 30% in the last thirty days. The annual gain comes to 178% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, given close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may consider TTM Technologies as a stock to avoid entirely with its 54.7x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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With earnings growth that's superior to most other companies of late, TTM Technologies 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.

See our latest analysis for TTM Technologies

If you'd like to see what analysts are forecasting going forward, you should check out our free report on TTM Technologies.

Is There Enough Growth For TTM Technologies?

There's an inherent assumption that a company should far outperform the market for P/E ratios like TTM Technologies' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 94% gain to the company's bottom line. Pleasingly, EPS has also lifted 35% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 51% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 16% growth forecast for the broader market.

In light of this, it's understandable that TTM Technologies' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On TTM Technologies' P/E

Shares in TTM Technologies have built up some good momentum lately, which has really inflated its P/E. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of TTM Technologies' 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.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for TTM Technologies that you should be aware of.

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.