Julius Baer Group Ltd (SWX:BAER) closed yesterday at CHF62.88, which left some investors asking whether the high earnings potential can still be justified at this price. Below I will be talking through a basic metric which will help answer this question. View our latest analysis for Julius Baer Group
What can we expect from Julius Baer Group in the future?Analysts are predicting good growth prospects for Julius Baer Group over the next couple of years. The consensus forecast from 19 analysts is certainly positive with earnings per share estimated to surge from current levels of CHF3.25 to CHF4.944 over the next three years. This results in an annual growth rate of 12.60%, on average, which signals a market-beating outlook in the upcoming years.
Can BAER’s share price be justified by its earnings growth?
BAER is trading at price-to-earnings (PE) ratio of 19.35x, which suggests that Julius Baer Group is undervalued based on its latest annual earnings update compared to the capital markets average of 20.71x , and undervalued relative to the current CH market average of 22.21x .
Given that BAER’s price-to-earnings of 19.35x lies below the industry average, this already indicates that the company could be potentially undervalued. But, seeing as Julius Baer Group 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 19.35x and expected year-on-year earnings growth of 12.60% give Julius Baer Group a higher PEG ratio of 1.54x. This means that, when we account for Julius Baer Group’s growth, the stock can be viewed as a bit overvalued , based on its fundamentals.
What this means for you:
BAER’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 BAER’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 BAER 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 BAER’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.