EVRAZ plc (LSE:EVR) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of £4.443 is based on unrealistic expectations. Let’s look into this by assessing EVR’s expected growth over the next few years. View our latest analysis for EVRAZ
What can we expect from EVR in the future?Investors in EVRAZ 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 8 analysts are certainly positive with earnings forecasted to rise significantly from today’s level of $0.49 to $0.821 over the next three years. This results in an annual growth rate of 12.02%, on average, which signals a market-beating outlook in the upcoming years.
Can EVR’s share price be justified by its earnings growth?
EVRAZ is available at a price-to-earnings ratio of 12.49x, showing us it is undervalued relative to the current GB market average of 17.66x , and overvalued based on current earnings compared to the metals and mining industry average of 12.07x .
We understand EVR seems to be overvalued based on its current earnings, compared to its industry peers. But, since EVRAZ is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 12.49x and expected year-on-year earnings growth of 12.02% give EVRAZ an acceptable PEG ratio of 1.04x. This tells us that when we include its growth in our analysis EVRAZ’s stock can be considered slightly overvalued , based on the fundamentals.
What this means for you:
EVR’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: Is EVR’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 EVR 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 EVR’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.