Is Metall Zug AG’s (VTX:METN) Future Growth Already Accounted For In Today’s Price?

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Metall Zug AG (VTX:METN) is considered a high-growth stock, but its last closing price of CHF2670 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

View our latest analysis for Metall Zug

What can we expect from Metall Zug in the future?

Investors in Metall Zug 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. Analyst consensus expectation is bullish with earnings per share estimated to surge from current levels of CHF141.593 to CHF223.348 over the next three years. This results in an annual growth rate of 15%, on average, which indicates a solid future in the near term.

Is METN’s share price justified by its earnings growth?

As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” Metall Zug is trading at price-to-earnings (PE) ratio of 18.86x, which tells us the stock is overvalued based on current earnings compared to the Consumer Durables industry average of 11.07x , and overvalued compared to the CH market average ratio of 18.4x .

SWX:METN Price Estimation Relative to Market, May 5th 2019
SWX:METN Price Estimation Relative to Market, May 5th 2019

We understand METN seems to be overvalued based on its current earnings, compared to its industry peers. But, since Metall Zug is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 18.86x and expected year-on-year earnings growth of 15% give Metall Zug a higher PEG ratio of 1.26x. So, when we include the growth factor in our analysis, Metall Zug appears slightly overvalued , based on the fundamentals.

What this means for you:

METN’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:

  1. Financial Health: Are METN’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 METN 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 METN’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.