Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Looking at Tecan Group Ltd.’s (VTX:TECN) fundamentals some investors are wondering if its last closing price of CHF238 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
Should you get excited about TECN’s future?
According to the analysts covering the company, the following few years should bring about good growth prospects for Tecan Group. The consensus forecast from 4 analysts is buoyant with earnings per share estimated to rise from today’s level of CHF6.021 to CHF8.133 over the next three years. This indicates an estimated earnings growth rate of 12% per year, on average, which indicates a solid future in the near term.
Can TECN’s share price be justified by its earnings growth?
As Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price.” Tecan Group is available at price-to-earnings ratio of 39.53x, showing us it is overvalued compared to the CH market average ratio of 18.26x , and undervalued based on its latest annual earnings update compared to the Life Sciences average of 39.53x .
Given that TECN’s price-to-earnings of 39.53x lies below the industry average, this already indicates that the company could be potentially undervalued. However, seeing as Tecan 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 39.53x and expected year-on-year earnings growth of 12% give Tecan Group a quite high PEG ratio of 3.22x. Based on this growth, Tecan Group’s stock can be considered overvalued , based on the fundamentals.
What this means for you:
TECN’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 TECN’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 TECN 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 TECN’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.
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 firstname.lastname@example.org. 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.