Rexnord Corporation (NYSE:RXN) is considered a high growth stock. However its last closing price of $25.27 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing RXN’s expected growth over the next few years.
Has the RXN train slowed down?
Analysts are predicting good growth prospects for Rexnord over the next couple of years. The consensus forecast from 8 analysts is bullish with earnings per share estimated to rise from today’s level of $1.64 to $2.353 over the next three years. This indicates an estimated earnings growth rate of 12% per year, on average, which illustrates an optimistic outlook in the near term.
Is RXN available at a good price after accounting for its growth?
Rexnord is trading at quite low price-to-earnings (PE) ratio of 15.41x. This tells us the stock is undervalued relative to the current US market average of 17.05x , and undervalued based on its latest annual earnings update compared to the Machinery average of 18.49x .
We already know that RXN appears to be undervalued based on its PE ratio, compared to the industry average. However, to be able to properly assess the value of a high-growth stock such as Rexnord, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 15.41x and expected year-on-year earnings growth of 12% give Rexnord a higher PEG ratio of 1.29x. This means that, when we account for Rexnord’s growth, the stock can be viewed as slightly overvalued , based on fundamental analysis.
What this means for you:
RXN’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:
- Financial Health: Are RXN’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 RXN 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 RXN’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 email@example.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.