Is MLP SE’s (FRA:MLP) Stock Available For A Good Price After Accounting For Growth?

Growth expectations for MLP SE (FRA:MLP) are high, but many investors are starting to ask whether its last close at €5.47 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question. Check out our latest analysis for MLP

Has the MLP train has slowed down?

Analysts are predicting good growth prospects for MLP over the next couple of years. Expectations from 4 analysts are bullish with earnings forecasted to rise significantly from today’s level of €0.260 to €0.378 over the next three years. On average, this leads to a growth rate of 12.55% each year, which illustrates an optimistic outlook in the near term.

Is MLP’s share price justifiable by its earnings growth?

As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” MLP is trading at price-to-earnings (PE) ratio of 21.06x, which tells us the stock is overvalued based on current earnings compared to the capital markets industry average of 15.14x , and overvalued compared to the DE market average ratio of 18.21x .

DB:MLP PE PEG Gauge June 21st 18
DB:MLP PE PEG Gauge June 21st 18

We already know that MLP appears to be overvalued when compared to its industry average. But, since MLP is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 21.06x and expected year-on-year earnings growth of 12.55% give MLP a higher PEG ratio of 1.68x. Based on this growth, MLP’s stock can be considered a bit overvalued , based on the fundamentals.

What this means for you:

MLP’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: Is MLP’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 MLP 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 MLP’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.