Growth expectations for Coca-Cola HBC AG (LON:CCH) are high, but many investors are starting to ask whether its last close at £26.13 can still be rationalized by the future potential. 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 Coca-Cola HBC
What can we expect from Coca-Cola HBC in the future?
According to the analysts covering the company, the following few years should bring about good growth prospects for Coca-Cola HBC. The consensus forecast from 14 analysts is certainly positive with earnings forecasted to rise significantly from today's level of €1.231 to €1.695 over the next three years. This results in an annual growth rate of 10.5%, on average, which illustrates an optimistic outlook in the near term.Can CCH's share price be justified by its earnings growth?
CCH is trading at price-to-earnings (PE) ratio of 23.83x, which suggests that Coca-Cola HBC is overvalued based on current earnings compared to the beverage industry average of 23.32x , and overvalued compared to the GB market average ratio of 17.37x . This multiple is a median of profitable companies of 7 Beverage companies in GB including Britvic, Diageo and A.G. BARR.
After looking at CCH's value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, since Coca-Cola HBC is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 23.83x and expected year-on-year earnings growth of 10.5% give Coca-Cola HBC a quite high PEG ratio of 2.27x. This means that, when we account for Coca-Cola HBC's growth, the stock can be viewed as overvalued , based on the fundamentals.
What this means for you:
CCH'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 highly recommend you to complete your research by taking a look at the following:
- Financial Health: Are CCH’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 CCH 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 CCH'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.