Huber+Suhner AG (VTX:HUBN) is considered a high-growth stock, but its last closing price of CHF69.8 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s look into this by assessing HUBN’s expected growth over the next few years.
Should you get excited about HUBN’s future?Investors in Huber+Suhner have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 5 analysts are certainly positive with earnings per share estimated to surge from current levels of CHF2.556 to CHF3.557 over the next three years. On average, this leads to a growth rate of 10% each year, which indicates a solid future in the near term.
Is HUBN’s share price justifiable by its earnings growth?
HUBN is available at a PE (price-to-earnings) ratio of 27.31x today, which tells us the stock is overvalued based on current earnings compared to the electrical industry average of 17.46x , and overvalued compared to the CH market average ratio of 18.56x .
We understand HUBN 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 Huber+Suhner, 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 27.31x and expected year-on-year earnings growth of 10% give Huber+Suhner a quite high PEG ratio of 2.63x. So, when we include the growth factor in our analysis, Huber+Suhner appears overvalued , based on the fundamentals.
What this means for you:
HUBN’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: Are HUBN’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 HUBN 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 HUBN’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 firstname.lastname@example.org.