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GL Events (EPA:GLO) is considered a high-growth stock, but its last closing price of €21.6 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Below I will be talking through a basic metric which will help answer this question.
Where’s the growth?Investors in GL Events 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. Expectations from 6 analysts are buoyant with earnings forecasted to rise significantly from today’s level of €1.693 to €2.023 over the next three years. This indicates an estimated earnings growth rate of 12% per year, on average, which illustrates an optimistic outlook in the near term.
Is GLO’s share price justified by its earnings growth?
Stocks like GL Events, with a price-to-earnings (P/E) ratio of 12.76x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that GLO is undervalued relative to the current FR market average of 16.53x , and undervalued based on its latest annual earnings update compared to the Commercial Services average of 16.18x .
We already know that GLO appears to be undervalued based on its PE ratio, compared to the industry average. However, seeing as GL Events 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 12.76x and expected year-on-year earnings growth of 12% give GL Events an acceptable PEG ratio of 1.1x. Based on this growth, GL Events’s stock can be considered slightly overvalued , based on its fundamentals.
What this means for you:
GLO’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:
- Financial Health: Are GLO’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.
- Past Track Record: Has GLO 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 GLO’s historicals for more clarity.
- 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 firstname.lastname@example.org. 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.