Gofore Oyj (HEL:GOFORE): Is Growth Priced In?

Gofore Oyj (HEL:GOFORE) is considered a high-growth stock, but its last closing price of €7.96 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

See our latest analysis for Gofore Oyj

What are the future expectations?

If you are bullish about Gofore Oyj’s growth potential then you are certainly not alone. The consensus forecast from 2 analysts is extremely bullish with earnings per share estimated to surge from current levels of €0.361 to €0.550 over the next three years. This results in an annual growth rate of 17%, on average, which illustrates a highly optimistic outlook in the near term.

Is GOFORE’s share price justifiable by its earnings growth?

GOFORE is trading at price-to-earnings (PE) ratio of 22.07x, which suggests that Gofore Oyj is overvalued based on current earnings compared to the IT industry average of 20.12x , and overvalued compared to the FI market average ratio of 18.88x .

HLSE:GOFORE Price Estimation Relative to Market, August 12th 2019
HLSE:GOFORE Price Estimation Relative to Market, August 12th 2019

After looking at GOFORE’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, since Gofore Oyj is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 22.07x and expected year-on-year earnings growth of 17% give Gofore Oyj a higher PEG ratio of 1.31x. Based on this growth, Gofore Oyj’s stock can be considered slightly overvalued , based on its fundamentals.

What this means for you:

GOFORE’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 GOFORE’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. Valuation: What is GOFORE worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GOFORE is currently mispriced by the market.
  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.