Why Advanced Energy Stock Exploded Higher Today

Advanced Energy Industries (NASDAQ: AEIS) stock rocketed 17% through 3:45 a.m. ET Wednesday after crushing on its Q3 earnings report last night.

Heading into the report, analysts forecast the power conversion, measurement, and control company would earn $1.47 per share on $441.5 million in quarterly sales. Advanced Energy flipped the digits, though, and ended up earning $1.74 per share, and its sales were $463.3 million.

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Advanced Energy Q3 earnings

"Third-quarter results surpassed the high end of our guidance due to increased demand for our AI data center solutions," said CEO Steve Kelley. The company's data center computing business grew sales 113% year over year, and total revenue was up 24%.

On earnings, the company earned $1.74 per share (adjusted), as noted. But generally accepted accounting principles (GAAP) earnings weren't half bad, either. Earnings as calculated according to GAAP surged 80.6% year over year to $1.21 per share, exceeding management guidance.

Is Advanced Energy stock a buy?

Speaking of guidance, management forecasts Q4 revenue will continue to climb to about $470 million, with GAAP profits of roughly $1.12 per share and non-GAAP, adjusted profit of $1.75 per share -- in line with Q3 results.

Valuation-wise, the company has earned $2.52 per share so far this year (GAAP). Assume the company hits the midrange of guidance, and full-year profit should be approximately $3.64 per share.

That would be a bit shy of the $3.70 per share that most analysts are forecasting. It would also mean that, at $226 and change, Advanced Energy stock currently costs a price-to-earnings ratio of more than 62.

Expensive? Yes. But if Advanced Energy can maintain its current rate of torrid 80% earnings growth, this stock may be worth the premium price.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.