Is Edelweiss Financial Services Limited’s (NSE:EDELWEISS) Future Growth Already Accounted For In Today’s Price?

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Edelweiss Financial Services Limited (NSE:EDELWEISS) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of ₹176.55 is based on unrealistic expectations. 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 Edelweiss Financial Services

Has the EDELWEISS train has slowed down?

If you are bullish about Edelweiss Financial Services’s growth potential then you are certainly not alone. Expectations from 5 analysts are extremely positive with earnings per share estimated to surge from current levels of ₹11.28 to ₹18.986 over the next three years. This results in an annual growth rate of 16%, on average, which illustrates a highly optimistic outlook in the near term.

Is EDELWEISS available at a good price after accounting for its growth?

Edelweiss Financial Services is trading at quite low price-to-earnings (PE) ratio of 15.65x. This tells us the stock is overvalued compared to the IN market average ratio of 15.44x , and overvalued based on current earnings compared to the Capital Markets industry average of 15.53x .

NSEI:EDELWEISS Price Estimation Relative to Market, June 24th 2019
NSEI:EDELWEISS Price Estimation Relative to Market, June 24th 2019

We understand EDELWEISS seems to be overvalued based on its current earnings, compared to its industry peers. But, to properly examine the value of a high-growth stock such as Edelweiss Financial Services, 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 15.65x and expected year-on-year earnings growth of 16% give Edelweiss Financial Services a low PEG ratio of 0.98x. This tells us that when we include its growth in our analysis Edelweiss Financial Services’s stock can be considered fairly valued , based on fundamental analysis.

What this means for you:

EDELWEISS’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 EDELWEISS’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 EDELWEISS 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 EDELWEISS’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.