Does Liechtensteinische Landesbank Aktiengesellschaft’s (VTX:LLBN) Stock Price Account For Its Growth?

Growth expectations for Liechtensteinische Landesbank Aktiengesellschaft (VTX:LLBN) are high, but many investors are starting to ask whether its last close at CHF68.9 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for Liechtensteinische Landesbank

Can we expect LLBN to keep growing?

Liechtensteinische Landesbank’s extremely high growth potential in the near future is attracting investors. The consensus forecast from 2 analysts is extremely positive with earnings forecasted to rise significantly from today’s level of CHF2.621 to CHF4.679 over the next three years. On average, this leads to a growth rate of 16% each year, which indicates an exceedlingly positive future in the near term.

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

As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” Liechtensteinische Landesbank is trading at price-to-earnings (PE) ratio of 26.28x, which tells us the stock is overvalued based on current earnings compared to the Banks industry average of 16.97x , and overvalued compared to the CH market average ratio of 18.39x .

SWX:LLBN Price Estimation Relative to Market, April 19th 2019
SWX:LLBN Price Estimation Relative to Market, April 19th 2019

We understand LLBN seems to be overvalued based on its current earnings, compared to its industry peers. But, to be able to properly assess the value of a high-growth stock such as Liechtensteinische Landesbank, 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 26.28x and expected year-on-year earnings growth of 16% give Liechtensteinische Landesbank a higher PEG ratio of 1.62x. So, when we include the growth factor in our analysis, Liechtensteinische Landesbank appears a bit overvalued , based on its fundamentals.

What this means for you:

LLBN’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:

  1. Financial Health: Are LLBN’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 LLBN 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 LLBN’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.