How might the reduction in operating costs influence the valuation multiples (e.g., P/E, EV/EBITDA) used by analysts?

Impact on valuation multiples

A 30 % cut in operating costs will lift Perimeter’s profit margins and EBITDA dramatically, even if top‑line revenue stays flat. When analysts recalculate the company’s earnings, the P/E ratio will tend to compress (a lower price‑to‑earnings multiple) because the denominator—net income—grows faster than the share price in the short run. As the market digests the cost‑saving news, the stock often rallies, which can offset the compression and leave the P/E near its historical range but at a higher absolute price level.

Conversely, EV/EBITDA will tighten (a lower EV/EBITDA multiple) because EBITDA expands while the enterprise value (EV) is only modestly adjusted by the price move. A tighter multiple signals to the market that the firm is now generating cash more efficiently, prompting analysts to assign a higher growth premium to the valuation. In practice, you’ll see EV/EBITDA move from a “high‑multiple” (e.g., 20‑x) to a more “mid‑range” (e.g., 12‑x) level, reflecting the improved operating leverage.

Trading implications

• Short‑term catalyst: The cost‑reduction announcement and the upcoming Q2‑2025 webcast act as a near‑term catalyst. Expect a bullish bias on the chart—breaks above the recent $0.85 resistance could trigger a short‑term rally toward $0.95–$1.00, especially if the call confirms stronger‑than‑expected margins.
  
• Risk management: Keep a stop just below the $0.78 support line (the low of the last two weeks) to protect against a sell‑off if the market doubts the sustainability of the savings.
  
• Positioning: For a bullish view, consider a partial long entry on a pull‑back to $0.80–$0.82 with a target near $1.00, reflecting the anticipated multiple compression and upside from higher earnings. If the price already spikes past $0.95, a scaled‑out to lock in gains while still holding a small core position can capture upside while preserving capital for a possible re‑test of the $0.85 level.
  

Overall, the cost‑cutting initiative improves Perimeter’s fundamental profile, prompting analysts to re‑price the stock on tighter valuation multiples. The upside potential is priced in through a likely P/E/EV‑EBITDA compression, making the current price a more attractive entry point for momentum‑driven traders.