Does James River Group Holdings, Ltd.’s (NASDAQ:JRVR) August Stock Price Reflect Its Future Growth?

James River Group Holdings, Ltd. (NASDAQ:JRVR) is considered a high-growth stock, but its last closing price of $47.44 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s look into this by assessing JRVR’s expected growth over the next few years.

Check out our latest analysis for James River Group Holdings

What can we expect from James River Group Holdings in the future?

Investors in James River Group Holdings have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 3 analysts are bullish with earnings per share estimated to rise from today’s level of $2.471 to $3.685 over the next three years. This results in an annual growth rate of 14%, on average, which illustrates an optimistic outlook in the near term.

Can JRVR’s share price be justified by its earnings growth?

JRVR is available at a PE (price-to-earnings) ratio of 19.2x today, which tells us the stock is overvalued based on current earnings compared to the Insurance industry average of 16.71x , and overvalued compared to the US market average ratio of 17.55x .

NasdaqGS:JRVR Price Estimation Relative to Market, August 5th 2019
NasdaqGS:JRVR Price Estimation Relative to Market, August 5th 2019

After looking at JRVR’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, seeing as James River Group Holdings is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 19.2x and expected year-on-year earnings growth of 14% give James River Group Holdings a higher PEG ratio of 1.33x. This means that, when we account for James River Group Holdings’s growth, the stock can be viewed as slightly overvalued , based on its fundamentals.

What this means for you:

JRVR’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:

  1. Financial Health: Are JRVR’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.
  2. Past Track Record: Has JRVR 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 JRVR’s historicals for more clarity.
  3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.