PNB Housing Finance Limited (NSE:PNBHOUSING) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of ₹800.3 is based on unrealistic expectations. Let’s look into this by assessing PNBHOUSING’s expected growth over the next few years.
What can we expect from PNB Housing Finance in the future?
PNB Housing Finance is poised for significantly high earnings growth in the near future. The consensus forecast from 11 analysts is extremely positive with earnings forecasted to rise significantly from today’s level of ₹54.011 to ₹100.358 over the next three years. This indicates an estimated earnings growth rate of 28% per year, on average, which indicates an exceedlingly positive future in the near term.
Is PNBHOUSING’s share price justified by its earnings growth?
Stocks like PNB Housing Finance, with a price-to-earnings (P/E) ratio of 15.25x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that PNBHOUSING is undervalued relative to the current IN market average of 17.52x , and undervalued based on its latest annual earnings update compared to the mortgage average of 15.96x . This multiple is a median of profitable companies of 10 Mortgage companies in IN including Pacheli Industrial Finance, Indiabulls Housing Finance and Can Fin Homes.
We already know that PNBHOUSING appears to be undervalued based on its PE ratio, compared to the industry average. However, to properly examine the value of a high-growth stock such as PNB Housing Finance, 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 15.25x and expected year-on-year earnings growth of 28% give PNB Housing Finance a very low PEG ratio of 0.54x. So, when we include the growth factor in our analysis, PNB Housing Finance appears relatively cheap , based on its fundamentals.
What this means for you:
PNBHOUSING’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:
- Financial Health: Are PNBHOUSING’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 PNBHOUSING 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 PNBHOUSING’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.
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 email@example.com.