GBST Holdings Limited (ASX:GBT) is considered a high growth stock. However its last closing price of A$1.52 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing GBT’s expected growth over the next few years.
Can we expect GBT to keep growing?
GBST Holdings is poised for significantly high earnings growth in the near future. Expectations from 6 analysts are extremely positive with earnings per share estimated to rise from today’s level of A$0.0920 to A$0.183 over the next three years. This results in an annual growth rate of 24%, on average, which indicates an exceedlingly positive future in the near term.
Is GBT’s share price justifiable by its earnings growth?
GBST Holdings is trading at quite low price-to-earnings (PE) ratio of 16.52x. This tells us the stock is overvalued compared to the AU market average ratio of 14.52x , and undervalued based on its latest annual earnings update compared to the IT average of 21.78x .
GBST Holdings’s price-to-earnings ratio stands at 16.52x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, to be able to properly assess the value of a high-growth stock such as GBST Holdings, 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 16.52x and expected year-on-year earnings growth of 24% give GBST Holdings a very low PEG ratio of 0.70x. This means that, when we account for GBST Holdings’s growth, the stock can be viewed as relatively cheap , based on fundamental analysis.
What this means for you:
GBT’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 highly recommend you to complete your research by taking a look at the following:
- Financial Health: Are GBT’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 GBT 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 GBT’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.