Looking at Edelweiss Financial Services Limited’s (NSE:EDELWEISS) fundamentals some investors are wondering if its last closing price of ₹306.2 represents a good value for money for this high growth stock. Let’s look into this by assessing EDELWEISS’s expected growth over the next few years.
Has the EDELWEISS train has slowed down?
Edelweiss Financial Services’s growth potential is very attractive. The consensus forecast from 6 analysts is extremely positive with earnings per share estimated to rise from today’s level of ₹10.725 to ₹21.446 over the next three years. This results in an annual growth rate of 27.60%, on average, which signals a market-beating outlook in the upcoming years.
Is EDELWEISS’s share price justified by its earnings growth?
EDELWEISS is trading at price-to-earnings (PE) ratio of 28.55x, which suggests that Edelweiss Financial Services is overvalued based on current earnings compared to the capital markets industry average of 20.29x , and overvalued compared to the IN market average ratio of 21.46x . This multiple is a median of profitable companies of 25 Capital Markets companies in IN including GFL Financials India, Sharp Investments and Confidence Finance and Trading.
We already know that EDELWEISS appears to be overvalued when compared to its industry average. But, since Edelweiss Financial Services is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 28.55x and expected year-on-year earnings growth of 27.60% give Edelweiss Financial Services an acceptable PEG ratio of 1.03x. This means that, when we account for Edelweiss Financial Services’s growth, the stock can be viewed as slightly overvalued , based on its fundamentals.
What this means for you:
EDELWEISS’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not 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 highly recommend you to complete your research by taking a look at the following:
- 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.
- 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.
- 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.