Is Trackwise Designs Plc’s (LON:TWD) Future Growth Already Accounted For In Today’s Price?

Looking at Trackwise Designs Plc’s (LON:TWD) fundamentals some investors are wondering if its last closing price of £0.975 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

See our latest analysis for Trackwise Designs

How is Trackwise Designs going to perform in the future?

One reason why investors are attracted to TWD is the high growth potential in the near future. Analyst expectations are extremely bullish with earnings per share estimated to rise from today’s level of £0.0445 to £0.0509 over the next three years. This results in an annual growth rate of 41%, on average, which indicates an exceedlingly positive future in the near term.

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

Trackwise Designs is available at price-to-earnings ratio of 21.93x, showing us it is overvalued based on current earnings compared to the Electronic industry average of 14.41x , and overvalued compared to the GB market average ratio of 15.16x .

AIM:TWD PE PEG Gauge January 8th 19
AIM:TWD PE PEG Gauge January 8th 19

We already know that TWD appears to be overvalued when compared to its industry average. However, to properly examine the value of a high-growth stock such as Trackwise Designs, 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 21.93x and expected year-on-year earnings growth of 41% give Trackwise Designs a very low PEG ratio of 0.54x. Based on this growth, Trackwise Designs’s stock can be considered relatively cheap , based on the fundamentals.

What this means for you:

TWD’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 TWD’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. Valuation: What is TWD worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TWD is currently mispriced by the market.
  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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.