Yahoo Finance Earnings Working Against MaxCyte, Inc.'s (LON:MXCT) Share Price Following 28% Dive
MaxCyte, Inc. (LON:MXCT) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 20% in that time.
In spite of the heavy fall in price, MaxCyte's price-to-earnings (or "P/E") ratio of -12.9x might still make it look like a strong buy right now compared to the market in the United Kingdom, where around half of the companies have P/E ratios above 15x and even P/E's above 29x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.
MaxCyte could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
View our latest analysis for MaxCyte
If you'd like to see what analysts are forecasting going forward, you should check out our free report on MaxCyte.
How Is MaxCyte's Growth Trending?
There's an inherent assumption that a company should far underperform the market for P/E ratios like MaxCyte's to be considered reasonable.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 78%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.
Shifting to the future, estimates from the seven analysts covering the company suggest earnings should grow by 4.8% per year over the next three years. Meanwhile, the rest of the market is forecast to expand by 12% per year, which is noticeably more attractive.
With this information, we can see why MaxCyte is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
The Final Word
Having almost fallen off a cliff, MaxCyte's share price has pulled its P/E way down as well. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that MaxCyte maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.
You should always think about risks. Case in point, we've spotted 2 warning signs for MaxCyte you should be aware of.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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.
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