ICICI Prudential Life Insurance Company Limited (NSE:ICICIPRULI): Is Growth Priced In?

Looking at ICICI Prudential Life Insurance Company Limited’s (NSE:ICICIPRULI) fundamentals some investors are wondering if its last closing price of ₹314.9 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

View our latest analysis for ICICI Prudential Life Insurance

Exciting times ahead?

According to the analysts covering the company, the following few years should bring about good growth prospects for ICICI Prudential Life Insurance. The consensus forecast from 22 analysts is buoyant with earnings forecasted to rise significantly from today’s level of ₹10.397 to ₹13.626 over the next three years. This results in an annual growth rate of 12%, on average, which illustrates an optimistic outlook in the near term.

Is ICICIPRULI’s share price justified by its earnings growth?

ICICI Prudential Life Insurance is looking rather expensive based on its price-to-earnings (PE) ratio of 30.41x. This illustrates that ICICI Prudential Life Insurance is overvalued compared to the IN market average ratio of 15.59x , and undervalued based on its latest annual earnings update compared to the Insurance average of 31.71x .

NSEI:ICICIPRULI Price Estimation Relative to Market, February 26th 2019
NSEI:ICICIPRULI Price Estimation Relative to Market, February 26th 2019

Given that ICICIPRULI’s price-to-earnings of 30.41x lies below the industry average, this already indicates that the company could be potentially undervalued. However, to properly examine the value of a high-growth stock such as ICICI Prudential Life Insurance, 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 30.41x and expected year-on-year earnings growth of 12% give ICICI Prudential Life Insurance a quite high PEG ratio of 2.62x. So, when we include the growth factor in our analysis, ICICI Prudential Life Insurance appears overvalued , based on fundamental analysis.

What this means for you:

ICICIPRULI’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:

  1. Financial Health: Are ICICIPRULI’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 ICICIPRULI 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 ICICIPRULI’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.