To the annoyance of some shareholders, CN Energy Group. Inc. (NASDAQ:CNEY) shares are down a considerable 57% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 79% share price decline.
After such a large drop in price, CN Energy Group may be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 9.5x, since almost half of all companies in the United States have P/E ratios greater than 16x and even P/E's higher than 30x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
With earnings growth that's exceedingly strong of late, CN Energy Group has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you 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.
Why CNEY Stockholders Are Upset
Investors almost never react positively to news a company is planning a public stock offering. This often results in a company’s stock, such as CNEY, falling alongside offering news. There are a couple of reasons for that.
First is the increase in outstanding shares. This dilutes current shareholders’ stake in the company. Second is the offering price. This is often a discount compared to the stock’s trading price, which devalues the stock.
CNEY stock is seeing heavy trading alongside the public offering news. This has more than 1 million shares changing hands as of this writing. For comparison, the company’s daily average trading volume is about 953,000 shares.
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