Does Innelec Multimédia SA’s (EPA:INN) Stock Price Account For Its Growth?

Growth expectations for Innelec Multimédia SA (EPA:INN) are high, but many investors are starting to ask whether its last close at €4.94 can still be rationalized by the future potential. Let’s look into this by assessing INN’s expected growth over the next few years.

View our latest analysis for Innelec Multimédia

What can we expect from Innelec Multimédia in the future?

One reason why investors are attracted to INN is the high growth potential in the near future. Consensus expectations from market analysts are extremely positive with earnings per share estimated to surge from current levels of €0.491 to €0.700 over the next three years. This results in an annual growth rate of 16%, on average, which illustrates a highly optimistic outlook in the near term.

Is INN’s share price justifiable by its earnings growth?

Innelec Multimédia is available at a price-to-earnings ratio of 10.06x, showing us it is undervalued relative to the current FR market average of 16.1x , and undervalued based on its latest annual earnings update compared to the Electronic average of 12.32x .

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

Innelec Multimédia’s price-to-earnings ratio stands at 10.06x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, to properly examine the value of a high-growth stock such as Innelec Multimédia, 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 10.06x and expected year-on-year earnings growth of 16% give Innelec Multimédia a very low PEG ratio of 0.61x. This means that, when we account for Innelec Multimédia’s growth, the stock can be viewed as relatively cheap , based on the fundamentals.

What this means for you:

INN’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 INN’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 INN 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 INN’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.

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