Is PNB Housing Finance Limited (BOM:540173) Undervalued After Accounting For Its Future Growth?

Growth expectations for PNB Housing Finance Limited (BOM:540173) are high, but many investors are starting to ask whether its last close at ₹1134.6 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question. See our latest analysis for PNB Housing Finance

What can we expect from PNB Housing Finance in the future?

The excitement around PNB Housing Finance's growth potential is not unfounded. Expectations from 12 analysts are extremely bullish with earnings per share estimated to rise from today's level of ₹49.82 to ₹105.445 over the next three years. This results in an annual growth rate of 24.88%, on average, which illustrates a highly optimistic outlook in the near term.

Is 540173's share price justifiable by its earnings growth?

540173 is trading at price-to-earnings (PE) ratio of 22.77x, which suggests that PNB Housing Finance is overvalued based on current earnings compared to the mortgage industry average of 18.33x , and overvalued compared to the IN market average ratio of 22.21x .

We already know that 540173 appears to be overvalued when compared to its industry average. However, since PNB Housing Finance is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 22.77x and expected year-on-year earnings growth of 24.88% give PNB Housing Finance a low PEG ratio of 0.92x. This tells us that when we include its growth in our analysis PNB Housing Finance's stock can be considered fairly valued , based on fundamental analysis.

What this means for you:

540173'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: Is 540173’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 540173 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 540173'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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.