Craneware plc (LON:CRW): Can Growth Justify Its April Share Price?

Craneware plc (LON:CRW) is considered a high growth stock. However its last closing price of £24 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing CRW’s expected growth over the next few years.

Check out our latest analysis for Craneware

How is CRW going to perform in the future?

Craneware is poised for extremely high earnings growth in the near future. The consensus forecast from 5 analysts is extremely positive with earnings per share estimated to surge from current levels of $0.632 to $0.878 over the next three years. This indicates an estimated earnings growth rate of 15% per year, on average, which indicates an exceedlingly positive future in the near term.

Is CRW’s share price justified by its earnings growth?

Craneware is trading at price-to-earnings (PE) ratio of 49.49x, this tells us the stock is overvalued compared to the GB market average ratio of 15.48x , and overvalued based on current earnings compared to the Healthcare Services industry average of 28.46x .

AIM:CRW Price Estimation Relative to Market, April 1st 2019
AIM:CRW Price Estimation Relative to Market, April 1st 2019

After looking at CRW’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, since Craneware is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 49.49x and expected year-on-year earnings growth of 15% give Craneware a quite high PEG ratio of 3.23x. Based on this growth, Craneware’s stock can be considered overvalued , based on fundamental analysis.

What this means for you:

CRW’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:

  1. Financial Health: Are CRW’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 CRW 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 CRW’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.