Does Vienna Insurance Group AG’s (VIE:VIG) May Stock Price Reflect Its Future Growth?

Vienna Insurance Group AG (VIE:VIG) is considered a high growth stock. However its last closing price of €24 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

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See our latest analysis for Vienna Insurance Group

What can we expect from Vienna Insurance Group in the future?

Investors in Vienna Insurance Group 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 5 analysts are certainly positive with earnings per share estimated to rise from today’s level of €2.036 to €2.786 over the next three years. This results in an annual growth rate of 11%, on average, which indicates a solid future in the near term.

Is VIG’s share price justifiable by its earnings growth?

Stocks like Vienna Insurance Group, with a price-to-earnings (P/E) ratio of 11.79x, 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 VIG is undervalued relative to the current AT market average of 14.66x , and undervalued based on its latest annual earnings update compared to the Insurance average of 12.88x .

WBAG:VIG Price Estimation Relative to Market, May 16th 2019
WBAG:VIG Price Estimation Relative to Market, May 16th 2019

We already know that VIG appears to be undervalued based on its PE ratio, compared to the industry average. But, to properly examine the value of a high-growth stock such as Vienna Insurance Group, 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 11.79x and expected year-on-year earnings growth of 11% give Vienna Insurance Group an acceptable PEG ratio of 1.09x. Based on this growth, Vienna Insurance Group’s stock can be considered slightly overvalued , based on its fundamentals.

What this means for you:

VIG’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 VIG’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 VIG 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 VIG’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.