Does ASM Pacific Technology Limited’s (HKG:522) Stock Price Account For Its Growth?

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ASM Pacific Technology Limited (HKG:522) is considered a high growth stock. However its last closing price of HK$80 left investors wondering whether this growth has already been factored into the share price. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for ASM Pacific Technology

What can we expect from 522 in the future?

ASM Pacific Technology is poised for extremely high earnings growth in the near future. The consensus forecast from 17 analysts is extremely positive with earnings per share estimated to surge from current levels of HK$4.218 to HK$6.306 over the next three years. This indicates an estimated earnings growth rate of 22% per year, on average, which signals a market-beating outlook in the upcoming years.

Is 522’s share price justifiable by its earnings growth?

522 is available at a PE (price-to-earnings) ratio of 18.96x today, which tells us the stock is overvalued based on current earnings compared to the Semiconductor industry average of 14.64x , and overvalued compared to the HK market average ratio of 10.66x .

SEHK:522 Price Estimation Relative to Market, June 20th 2019
SEHK:522 Price Estimation Relative to Market, June 20th 2019

After looking at 522’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, since ASM Pacific Technology is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 18.96x and expected year-on-year earnings growth of 22% give ASM Pacific Technology a low PEG ratio of 0.84x. So, when we include the growth factor in our analysis, ASM Pacific Technology appears fairly valued , based on its fundamentals.

What this means for you:

522’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 522’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 522 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 522’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.