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Countplus Limited (ASX:CUP) is considered a high growth stock. However its last closing price of A$0.5 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing CUP’s expected growth over the next few years.
What can we expect from Countplus in the future?Analysts are predicting good growth prospects for Countplus over the next couple of years. Analyst expectations are buoyant with earnings per share estimated to rise from today’s level of A$0.0511 to A$0.0672 over the next three years. On average, this leads to a growth rate of 14% each year, which signals a market-beating outlook in the upcoming years.
Is CUP’s share price justified by its earnings growth?
Countplus is trading at quite low price-to-earnings (PE) ratio of 9.79x. This tells us the stock is undervalued relative to the current AU market average of 15.97x , and undervalued based on its latest annual earnings update compared to the Professional Services average of 17.14x .
We already know that CUP appears to be undervalued based on its PE ratio, compared to the industry average. But, to be able to properly assess the value of a high-growth stock such as Countplus, 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 9.79x and expected year-on-year earnings growth of 14% give Countplus a very low PEG ratio of 0.69x. This tells us that when we include its growth in our analysis Countplus’s stock can be considered relatively cheap , based on the fundamentals.
What this means for you:
CUP’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 CUP’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 CUP 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 CUP’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.
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 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.