B+S Banksysteme Aktiengesellschaft (FRA:DTD2) is considered a high growth stock. However its last closing price of €3.95 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there's any value here for current and potential future investors.
Check out our latest analysis for B+S Banksysteme
What can we expect from B+S Banksysteme in the future?
B+S Banksysteme's growth potential is very attractive. Analyst expectations are extremely bullish with earnings forecasted to rise significantly from today's level of €0.172 to €0.320 over the next three years. This results in an annual growth rate of 17%, on average, which signals a market-beating outlook in the upcoming years.
Is DTD2's share price justified by its earnings growth?
As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” B+S Banksysteme is trading at price-to-earnings (PE) ratio of 22.97x, which tells us the stock is undervalued based on its latest annual earnings update compared to the software average of 41.48x , and overvalued compared to the DE market average ratio of 18.53x . This multiple is a median of profitable companies of 21 Software companies in DE including Cliq Digital, CENIT and IVU Traffic Technologies.
We already know that DTD2 appears to be undervalued based on its PE ratio, compared to the industry average. But, to properly examine the value of a high-growth stock such as B+S Banksysteme, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 22.97x and expected year-on-year earnings growth of 17% give B+S Banksysteme a higher PEG ratio of 1.34x. Based on this growth, B+S Banksysteme's stock can be considered slightly overvalued , based on the fundamentals.
What this means for you:
DTD2's current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you're a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Are DTD2’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has DTD2 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of DTD2's historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.