Old Line Bancshares, Inc. (NASDAQ:OLBK): Can Growth Justify Its July Share Price?

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Old Line Bancshares, Inc. (NASDAQ:OLBK) is considered a high growth stock. However its last closing price of $26.38 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing OLBK’s expected growth over the next few years.

See our latest analysis for Old Line Bancshares

What can we expect from Old Line Bancshares in the future?

Investors in Old Line Bancshares have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 6 analysts are buoyant with earnings forecasted to rise significantly from today’s level of $1.761 to $2.505 over the next three years. This results in an annual growth rate of 13%, on average, which illustrates an optimistic outlook in the near term.

Is OLBK available at a good price after accounting for its growth?

Old Line Bancshares is available at a price-to-earnings ratio of 14.98x, showing us it is undervalued relative to the current US market average of 18.18x , and overvalued based on current earnings compared to the Banks industry average of 12.87x .

NasdaqCM:OLBK Price Estimation Relative to Market, July 4th 2019
NasdaqCM:OLBK Price Estimation Relative to Market, July 4th 2019

After looking at OLBK’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, to properly examine the value of a high-growth stock such as Old Line Bancshares, 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 14.98x and expected year-on-year earnings growth of 13% give Old Line Bancshares an acceptable PEG ratio of 1.11x. This means that, when we account for Old Line Bancshares’s growth, the stock can be viewed as slightly overvalued , based on fundamental analysis.

What this means for you:

OLBK’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 highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are OLBK’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 OLBK 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 OLBK’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.