Looking at GreenSky Inc’s (NASDAQ:GSKY) fundamentals some investors are wondering if its last closing price of $15 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
What can we expect from GreenSky in the future?
If you are bullish about GreenSky’s growth potential then you are certainly not alone. Expectations from 11 analysts are extremely bullish with earnings per share estimated to rise from today’s level of $0.835 to $1.21 over the next three years. On average, this leads to a growth rate of 37% each year, which illustrates a highly optimistic outlook in the near term.
Can GSKY’s share price be justified by its earnings growth?
GreenSky is available at price-to-earnings ratio of 17.95x, showing us it is undervalued based on its latest annual earnings update compared to the it average of 26.82x , and undervalued relative to the current US market average of 18.91x . This multiple is a median of profitable companies of 25 IT companies in US including Steel Connect, Presidio and Net 1 UEPS Technologies.
GreenSky’s price-to-earnings ratio stands at 17.95x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, since GreenSky is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 17.95x and expected year-on-year earnings growth of 37% give GreenSky an extremely low PEG ratio of 0.48x. This means that, when we account for GreenSky’s growth, the stock can be viewed as relatively cheap , based on fundamental analysis.
What this means for you:
GSKY’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may 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 GSKY’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.
- Valuation: What is GSKY 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 GSKY is currently mispriced by the market.
- 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 firstname.lastname@example.org.