Is Photronics, Inc.’s (NASDAQ:PLAB) Stock Available For A Good Price After Accounting For Growth?

Photronics, Inc. (NASDAQ:PLAB) closed yesterday at $8.77, which left some investors asking whether the high earnings potential can still be justified at this price. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

View our latest analysis for Photronics

Can we expect PLAB to keep growing?

Photronics is poised for significantly high earnings growth in the near future. Expectations from 3 analysts are extremely bullish with earnings per share estimated to rise from today’s level of $0.581 to $0.947 over the next three years. On average, this leads to a growth rate of 32% each year, which signals a market-beating outlook in the upcoming years.

Is PLAB’s share price justified by its earnings growth?

Photronics is available at a price-to-earnings ratio of 15.09x, showing us it is undervalued relative to the current US market average of 17.29x , and undervalued based on its latest annual earnings update compared to the Semiconductor average of 25.45x .

NasdaqGS:PLAB Price Estimation Relative to Market, August 13th 2019
NasdaqGS:PLAB Price Estimation Relative to Market, August 13th 2019

Given that PLAB’s price-to-earnings of 15.09x lies below the industry average, this already indicates that the company could be potentially undervalued. However, seeing as Photronics 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 15.09x and expected year-on-year earnings growth of 32% give Photronics an extremely low PEG ratio of 0.47x. Based on this growth, Photronics’s stock can be considered relatively cheap , based on fundamental analysis.

What this means for you:

PLAB’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:

  1. Financial Health: Are PLAB’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 PLAB 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 PLAB’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.