Looking at Pollard Banknote Limited’s (TSX:PBL) fundamentals some investors are wondering if its last closing price of CA$21.28 represents a good value for money for this high growth stock. 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 Pollard Banknote
What can we expect from PBL in the future?One reason why investors are attracted to PBL is the high growth potential in the near future. The consensus forecast from 3 analysts is extremely bullish with earnings per share estimated to rise from today’s level of CA$0.713 to CA$1.539 over the next three years. On average, this leads to a growth rate of 23.87% each year, which indicates an exceedlingly positive future in the near term.
Can PBL’s share price be justified by its earnings growth?
As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” Pollard Banknote is trading at price-to-earnings (PE) ratio of 29.85x, which tells us the stock is overvalued based on current earnings compared to the hospitality industry average of 15.96x , and overvalued compared to the CA market average ratio of 15.49x .
We understand PBL seems to be overvalued based on its current earnings, compared to its industry peers. However, seeing as Pollard Banknote 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 29.85x and expected year-on-year earnings growth of 23.87% give Pollard Banknote a higher PEG ratio of 1.25x. This means that, when we account for Pollard Banknote’s growth, the stock can be viewed as slightly overvalued , based on its fundamentals.
What this means for you:
PBL’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 urge you to complete your research by taking a look at the following:
- Financial Health: Is PBL’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 PBL 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 PBL’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.