Is New Work SE’s (ETR:NWO) Growth Strong Enough To Justify Its August Share Price?

New Work SE (ETR:NWO) is considered a high growth stock. However its last closing price of €286 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing NWO’s expected growth over the next few years.

Check out our latest analysis for New Work

Exciting times ahead for NWO

New Work’s growth potential is very attractive. The consensus forecast from 4 analysts is extremely positive with earnings per share estimated to surge from current levels of €6.003 to €10.848 over the next three years. This results in an annual growth rate of 23%, on average, which illustrates a highly optimistic outlook in the near term.

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

New Work is trading at price-to-earnings (PE) ratio of 47.65x, this tells us the stock is overvalued compared to the DE market average ratio of 19.06x , and overvalued based on current earnings compared to the Interactive Media and Services industry average of 35.01x .

XTRA:NWO Price Estimation Relative to Market, August 14th 2019
XTRA:NWO Price Estimation Relative to Market, August 14th 2019

We already know that NWO appears to be overvalued when compared to its industry average. However, to be able to properly assess the value of a high-growth stock such as New Work, 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 47.65x and expected year-on-year earnings growth of 23% give New Work a quite high PEG ratio of 2.1x. This tells us that when we include its growth in our analysis New Work’s stock can be considered overvalued , based on its fundamentals.

What this means for you:

NWO’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 NWO’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 NWO 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 NWO’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.

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 editorial-team@simplywallst.com. 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.