Is It Too Late To Buy Altran Technologies S.A. (EPA:ALT) At Its April Price?

Growth expectations for Altran Technologies S.A. (EPA:ALT) are high, but many investors are starting to ask whether its last close at €10.77 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question.

See our latest analysis for Altran Technologies

Should you get excited about ALT’s future?

The excitement around Altran Technologies’s growth potential is not unfounded. Expectations from 9 analysts are extremely positive with earnings per share estimated to rise from today’s level of €0.500 to €0.931 over the next three years. On average, this leads to a growth rate of 32% each year, which illustrates a highly optimistic outlook in the near term.

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

ALT is available at a PE (price-to-earnings) ratio of 21.53x today, which tells us the stock is overvalued based on current earnings compared to the IT industry average of 18.3x , and overvalued compared to the FR market average ratio of 16.1x .

ENXTPA:ALT Price Estimation Relative to Market, April 16th 2019
ENXTPA:ALT Price Estimation Relative to Market, April 16th 2019

We understand ALT seems to be overvalued based on its current earnings, compared to its industry peers. But, to properly examine the value of a high-growth stock such as Altran Technologies, 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 21.53x and expected year-on-year earnings growth of 32% give Altran Technologies a very low PEG ratio of 0.66x. This means that, when we account for Altran Technologies’s growth, the stock can be viewed as relatively cheap , based on the fundamentals.

What this means for you:

ALT’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 highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are ALT’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 ALT 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 ALT’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.