Is Per Aarsleff Holding A/S (CPH:PAAL B) Undervalued After Accounting For Its Future Growth?

Per Aarsleff Holding A/S (CPH:PAAL B) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of DKK235 is based on unrealistic expectations. Below I will be talking through a basic metric which will help answer this question.

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Check out our latest analysis for Per Aarsleff Holding

What can we expect from Per Aarsleff Holding in the future?

Per Aarsleff Holding is poised for extremely high earnings growth in the near future. The consensus forecast from 3 analysts is extremely positive with earnings forecasted to rise significantly from today’s level of DKK15.595 to DKK24.866 over the next three years. On average, this leads to a growth rate of 19% each year, which illustrates a highly optimistic outlook in the near term.

Is PAAL B’s share price justified by its earnings growth?

Per Aarsleff Holding is available at a price-to-earnings ratio of 15.07x, showing us it is undervalued relative to the current DK market average of 16.24x , and overvalued based on current earnings compared to the Construction industry average of 10.69x .

CPSE:PAAL B Price Estimation Relative to Market, May 18th 2019
CPSE:PAAL B Price Estimation Relative to Market, May 18th 2019

After looking at PAAL B’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, to properly examine the value of a high-growth stock such as Per Aarsleff Holding, 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 15.07x and expected year-on-year earnings growth of 19% give Per Aarsleff Holding a very low PEG ratio of 0.80x. This tells us that when we include its growth in our analysis Per Aarsleff Holding’s stock can be considered relatively cheap , based on the fundamentals.

What this means for you:

PAAL B’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may 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: Are PAAL B’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 PAAL B 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 PAAL B’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.