Coca-Cola HBC AG (LON:CCH) is considered a high-growth stock, but its last closing price of £27.4 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s look into this by assessing CCH's expected growth over the next few years.
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See our latest analysis for Coca-Cola HBC
Where's the growth?
Investors in Coca-Cola HBC 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 12 analysts are bullish with earnings per share estimated to surge from current levels of €1.216 to €1.761 over the next three years. This results in an annual growth rate of 11%, on average, which indicates a solid future in the near term.
Is CCH available at a good price after accounting for its growth?
Coca-Cola HBC is available at price-to-earnings ratio of 26.11x, showing us it is undervalued based on its latest annual earnings update compared to the Beverage average of 26.69x , and overvalued compared to the GB market average ratio of 16.33x .
Given that CCH's price-to-earnings of 26.11x lies below the industry average, this already indicates that the company could be potentially undervalued. But, to be able to properly assess the value of a high-growth stock such as Coca-Cola HBC, 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 26.11x and expected year-on-year earnings growth of 11% give Coca-Cola HBC a quite high PEG ratio of 2.45x. So, when we include the growth factor in our analysis, Coca-Cola HBC appears overvalued , based on fundamental analysis.
What this means for you:
CCH'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 urge you to complete your research by taking a look at the following:
- Financial Health: Are CCH’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 CCH 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 CCH'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 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.