Is Now The Right Time To Buy thyssenkrupp AG (XTRA:TKA)?

thyssenkrupp AG (XTRA:TKA) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of €23.46 is based on unrealistic expectations. Let’s look into this by assessing TKA's expected growth over the next few years. Check out our latest analysis for thyssenkrupp

Where's the growth?

thyssenkrupp's growth potential is very attractive. Expectations from 19 analysts are extremely bullish with earnings per share estimated to surge from current levels of €0.826 to €2.013 over the next three years. On average, this leads to a growth rate of 16.85% each year, which illustrates a highly optimistic outlook in the near term.

Can TKA's share price be justified by its earnings growth?

thyssenkrupp is available at price-to-earnings ratio of 28.41x, showing us it is overvalued based on current earnings compared to the metals and mining industry average of 12.47x , and overvalued compared to the DE market average ratio of 18.46x .

After looking at TKA's value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, to be able to properly assess the value of a high-growth stock such as thyssenkrupp, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock's valuation. A PE ratio of 28.41x and expected year-on-year earnings growth of 16.85% give thyssenkrupp a higher PEG ratio of 1.69x. So, when we include the growth factor in our analysis, thyssenkrupp appears a bit overvalued , based on its fundamentals.

What this means for you:

TKA'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:

1. Financial Health: Is TKA’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 TKA 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 TKA'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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.