Does SSH Communications Security Oyj’s (HEL:SSH1V) February Stock Price Reflect Its Future Growth?

SSH Communications Security Oyj (HEL:SSH1V) closed yesterday at €1.705, which left some investors asking whether the high earnings potential can still be justified at this price. Let’s look into this by assessing SSH1V’s expected growth over the next few years.

View our latest analysis for SSH Communications Security Oyj

Can we expect SSH1V to keep growing?

If you are bullish about SSH Communications Security Oyj’s growth potential then you are certainly not alone. Analyst expectations are extremely positive with earnings forecasted to rise significantly from today’s level of €0.0207 to €0.0399 over the next three years. This indicates an estimated earnings growth rate of 23% per year, on average, which signals a market-beating outlook in the upcoming years.

Is SSH1V available at a good price after accounting for its growth?

The stock is trading at a lofty price-to-earnings (PE) ratio of 82.22x, telling us that SSH Communications Security Oyj is overvalued based on current earnings compared to the Software industry average of 65.47x , and overvalued compared to the FI market average ratio of 17.99x .

HLSE:SSH1V Price Estimation Relative to Market, February 28th 2019
HLSE:SSH1V Price Estimation Relative to Market, February 28th 2019

We already know that SSH1V appears to be overvalued when compared to its industry average. But, seeing as SSH Communications Security Oyj is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 82.22x and expected year-on-year earnings growth of 23% give SSH Communications Security Oyj a quite high PEG ratio of 3.6x. So, when we include the growth factor in our analysis, SSH Communications Security Oyj appears overvalued , based on fundamental analysis.

What this means for you:

SSH1V’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 SSH1V’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 SSH1V 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 SSH1V’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.