Back in early January, I predicted that FTSE AIM 100 space stock Filtronic (LSE: FTC) would soar in 2026. It’s fair to say that call was on the money – year to date, it’s up about 130% and we’re only in May!
Is the growth stock still worth considering after these high-octane gains? Let’s discuss.
Two new deals announced
From an operational perspective, Filtronic – which specialises in advanced wireless communications solutions – continues to go from strength to strength. Recently, it announced a number of new deals.
For example, on 26 March, it announced an $8m contract with a US company to design, develop, produce, and qualify amplifiers for satellite communications. Shortly after this, on 1 April, it announced that it had been selected by a major European defence prime for the initial phase of a new technology programme and that it had won an initial contract for wide-bandwidth solutions worth £0.4m.
These deals are no doubt encouraging. They signal that the company’s technology is in demand.
The stock is expensive now
Looking at the company from an investment perspective, however, I have a few concerns today. I am no longer as bullish as I was back in January.
One issue for me is that the share price has risen a long way in a very short space of time amid excitement around space stocks (the SpaceX IPO has fuelled this). And as a result, the company’s valuation is now extremely high.
At present, City analysts forecast earnings per share of 3.69p for the year starting 1 June 2026. So, at today’s share price of 404p, we have a price-to-earnings (P/E) ratio of 109.
I was comfortable with a P/E ratio near 50 back in January. But near 110, the risk levels here are very high.
I’ll point out that analysts at Berenberg recently raised their target price to 360p (not far below the current price) so they appear to see the current valuation as justified. Personally though, I see it as overstretched.
Insiders are selling shares
Another issue for me is that directors have recently been selling stock. In April, three different directors offloaded shares.
Now, insiders sell shares for many reasons (eg, buying a house, paying tax, paying for school/university fees). However, when multiple insiders are selling stock simultaneously it can be a bit of a red flag.
It’s worth noting that among those selling were the CFO and the chair. These are top-level insiders and they are likely to have the most information on the company.
Still worth it?
Given the high valuation and the insider selling, I don’t see the stock as one to consider today. To my mind, the risk/reward set-up is not attractive at current levels.
If the stock was to experience a material pullback (to say 240p to 270p), however, it could be worth considering. Because there’s no doubt that the company has long-term growth potential.
