Is Wulff-Yhtiöt Oyj (HEL:WUF1V) Undervalued After Accounting For Its Future Growth?

Wulff-Yhtiöt Oyj (HEL:WUF1V) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of €1.69 is based on unrealistic expectations. Let’s look into this by assessing WUF1V’s expected growth over the next few years.

See our latest analysis for Wulff-Yhtiöt Oyj

What can we expect from Wulff-Yhtiöt Oyj in the future?

Investors in Wulff-Yhtiöt Oyj have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Consensus expectations from market analysts are bullish with earnings forecasted to rise significantly from today’s level of €0.154 to €0.220 over the next three years. This results in an annual growth rate of 11%, on average, which illustrates an optimistic outlook in the near term.

Can WUF1V’s share price be justified by its earnings growth?

Wulff-Yhtiöt Oyj is available at a price-to-earnings ratio of 10.95x, showing us it is undervalued relative to the current FI market average of 19.9x , and undervalued based on its latest annual earnings update compared to the Retail Distributors average of 13.77x .

HLSE:WUF1V Price Estimation Relative to Market, April 7th 2019
HLSE:WUF1V Price Estimation Relative to Market, April 7th 2019

Given that WUF1V’s price-to-earnings of 10.95x lies below the industry average, this already indicates that the company could be potentially undervalued. However, to be able to properly assess the value of a high-growth stock such as Wulff-Yhtiöt Oyj, 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 10.95x and expected year-on-year earnings growth of 11% give Wulff-Yhtiöt Oyj an acceptable PEG ratio of 1.02x. So, when we include the growth factor in our analysis, Wulff-Yhtiöt Oyj appears slightly overvalued , based on its fundamentals.

What this means for you:

WUF1V’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 WUF1V’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 WUF1V 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 WUF1V’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.