Is Zynex, Inc. (NASDAQ:ZYXI) Undervalued After Accounting For Its Future Growth?

Zynex, Inc. (NASDAQ:ZYXI) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of $8.94 is based on unrealistic expectations. Let’s look into this by assessing ZYXI’s expected growth over the next few years.

See our latest analysis for Zynex

Can we expect ZYXI to keep growing?

If you are bullish about Zynex’s growth potential then you are certainly not alone. The consensus forecast from 2 analysts is extremely bullish with earnings per share estimated to rise from today’s level of $0.301 to $0.469 over the next three years. This results in an annual growth rate of 24%, on average, which indicates an exceedlingly positive future in the near term.

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

Zynex is available at price-to-earnings ratio of 29.73x, showing us it is undervalued based on its latest annual earnings update compared to the Medical Equipment average of 41.03x , and overvalued compared to the US market average ratio of 17.33x .

NasdaqCM:ZYXI Price Estimation Relative to Market, August 31st 2019
NasdaqCM:ZYXI Price Estimation Relative to Market, August 31st 2019

Given that ZYXI’s price-to-earnings of 29.73x lies below the industry average, this already indicates that the company could be potentially undervalued. But, seeing as Zynex 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 29.73x and expected year-on-year earnings growth of 24% give Zynex a higher PEG ratio of 1.26x. This means that, when we account for Zynex’s growth, the stock can be viewed as slightly overvalued , based on fundamental analysis.

What this means for you:

ZYXI’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 ZYXI’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 ZYXI 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 ZYXI’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.