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This FTSE 250 stock’s price has doubled. Would I buy it?

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Since the last time I wrote about the nanotechnology stock Oxford Instruments (LSE: OXIG) in June, its share price has risen 13%. A largely positive trading update posted yesterday resulted in a 3% increase in its share price from the day before. 

The FTSE 250 nanotechnology company manufactures a range of products used sectors ranging from mining to aerospace. It has a presence across geographies as well, which has held it in good stead over the last year. 

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Positive trading update for Oxford Instruments

The company’s latest trading update says that both orders and revenues have shown strong growth in the five months of its current financial year so far. The company now expects trading for the full year to be “slightly” ahead of expectations. It does expect some downside from currency fluctuations, however, which could impact revenue by 4% and operating profit by 3%. While this is a downer, the fact is that it has a limited impact. And in no way does it reflect on the company’s underlying performance. 

In fact, if anything, the latest update continues to add to Oxford Instrument’s ongoing robust performance. Its operating profit had risen by 33% for the full year ending 31 March as well, despite there being no change in its revenue because of the pandemic. 

Rising price for the FTSE 250 stock

It is little wonder then, that the company’s share price has been rising. In the past year alone, it has grown by 54%. This may not sound like a whole lot right now, given the low phase for the stock markets at this time last year. In fact, there are many stocks that show pretty impressive capital gains right now. But Oxford Instruments stands out, because its share price has been rising consistently for a while. In the last three years alone, its share price has more than doubled. 

The challenge to a stock like this is of course that it starts looking pricier than others over time. It has a price-to-earnings (P/E) ratio of 34 times right now. But then its prospects look good too. This indicates to me that there can be room for a share price increase. This is particularly so now that the economy is back. As more growth takes place, there are chances that demand for its products will do so as well. 

Would I buy it?

I have been bullish on the stock for a while now, but have somehow or the other not bought it. It has run up quite a bit since the time I first started writing about it. But it looks like it could rise even further. I maintain that the stock is a good buy for me, and one that I could hold for at least the next few years. 

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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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