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Repco Home Finance Limited (NSE:REPCOHOME) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of ₹402.8 is based on unrealistic expectations. Below I will be talking through a basic metric which will help answer this question.
What can we expect from Repco Home Finance in the future?
Analysts are predicting good growth prospects for Repco Home Finance over the next couple of years. Expectations from 6 analysts are certainly positive with earnings forecasted to rise significantly from today's level of ₹39.81 to ₹55.178 over the next three years. This results in an annual growth rate of 11%, on average, which indicates a solid future in the near term.
Can REPCOHOME's share price be justified by its earnings growth?
Repco Home Finance is available at a price-to-earnings ratio of 10.12x, showing us it is undervalued relative to the current IN market average of 16.03x , and undervalued based on its latest annual earnings update compared to the Consumer Finance average of 20.84x .
We already know that REPCOHOME appears to be undervalued based on its PE ratio, compared to the industry average. However, since Repco Home 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 10.12x and expected year-on-year earnings growth of 11% give Repco Home Finance a low PEG ratio of 0.94x. This tells us that when we include its growth in our analysis Repco Home Finance's stock can be considered fairly valued , based on its fundamentals.
What this means for you:
REPCOHOME'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 REPCOHOME’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 REPCOHOME 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 REPCOHOME'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.
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 email@example.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.