SpartanNash Company (NASDAQ:SPTN) is considered a high-growth stock, but its last closing price of $9.4 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Below I will be talking through a basic metric which will help answer this question.
What can we expect from SpartanNash in the future?
According to the analysts covering the company, the following few years should bring about good growth prospects for SpartanNash. The consensus forecast from 7 analysts is bullish with earnings per share estimated to rise from today’s level of $0.802 to $1.439 over the next three years. This results in an annual growth rate of 12%, on average, which indicates a solid future in the near term.
Is SPTN available at a good price after accounting for its growth?
Stocks like SpartanNash, with a price-to-earnings (P/E) ratio of 11.72x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that SPTN is undervalued relative to the current US market average of 17.54x , and undervalued based on its latest annual earnings update compared to the Consumer Retailing average of 22.51x .
SpartanNash’s price-to-earnings ratio stands at 11.72x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, to properly examine the value of a high-growth stock such as SpartanNash, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 11.72x and expected year-on-year earnings growth of 12% give SpartanNash a low PEG ratio of 0.99x. This tells us that when we include its growth in our analysis SpartanNash’s stock can be considered fairly valued , based on fundamental analysis.
What this means for you:
SPTN’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 urge you to complete your research by taking a look at the following:
- Financial Health: Are SPTN’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 SPTN 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 SPTN’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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.