Navitas Limited (ASX:NVT) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of A$4.41 is based on unrealistic expectations. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors. See our latest analysis for Navitas
Should you get excited about NVT’s future?Navitas is poised for extremely high earnings growth in the near future. Expectations from 8 analysts are extremely bullish with earnings per share estimated to rise from today’s level of A$0.144 to A$0.257 over the next three years. This indicates an estimated earnings growth rate of 16.68% per year, on average, which signals a market-beating outlook in the upcoming years.
Is NVT’s share price justifiable by its earnings growth?
Navitas is looking rather expensive based on its price-to-earnings (PE) ratio of 30.6x. This illustrates that Navitas is overvalued compared to the AU market average ratio of 17.17x , and overvalued based on current earnings compared to the consumer services industry average of 13.06x .
We understand NVT seems to be overvalued based on its current earnings, compared to its industry peers. However, seeing as Navitas 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 30.6x and expected year-on-year earnings growth of 16.68% give Navitas a higher PEG ratio of 1.83x. This means that, when we account for Navitas’s growth, the stock can be viewed as a bit overvalued , based on the fundamentals.
What this means for you:
NVT’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: Is NVT’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 NVT 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 NVT’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.