Is Julius Baer Group Ltd’s (VTX:BAER) Growth Strong Enough To Justify Its August Share Price?

Growth expectations for Julius Baer Group Ltd (VTX:BAER) are high, but many investors are starting to ask whether its last close at CHF55.08 can still be rationalized by the future potential. Let’s look into this by assessing BAER’s expected growth over the next few years.

View our latest analysis for Julius Baer Group

What can we expect from Julius Baer Group in the future?

Investors in Julius Baer Group 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. The consensus forecast from 19 analysts is bullish with earnings per share estimated to surge from current levels of CHF3.66 to CHF5.154 over the next three years. On average, this leads to a growth rate of 10.58% each year, which illustrates an optimistic outlook in the near term.

Is BAER available at a good price after accounting for its growth?

Stocks like Julius Baer Group, with a price-to-earnings (P/E) ratio of 15.05x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that BAER is undervalued relative to the current CH market average of 21.08x , and undervalued based on its latest annual earnings update compared to the capital markets average of 17.43x . This multiple is a median of profitable companies of 19 Capital Markets companies in CH including Qino, Nomura Holdings and DWS Group GmbH KGaA.

SWX:BAER PE PEG Gauge August 10th 18
SWX:BAER PE PEG Gauge August 10th 18

Julius Baer Group’s price-to-earnings ratio stands at 15.05x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, to properly examine the value of a high-growth stock such as Julius Baer Group, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 15.05x and expected year-on-year earnings growth of 10.58% give Julius Baer Group a higher PEG ratio of 1.42x. Based on this growth, Julius Baer Group’s stock can be considered slightly overvalued , based on fundamental analysis.

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 highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are 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.
  2. 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.
  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.

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 editorial-team@simplywallst.com.