Is It Too Late To Buy Lupin Limited (NSE:LUPIN) At Its June Price?

Looking at Lupin Limited’s (NSE:LUPIN) fundamentals some investors are wondering if its last closing price of ₹893.6 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 out our latest analysis for Lupin

Has the LUPIN train has slowed down?

Lupin’s growth potential is very attractive. The consensus forecast from 29 analysts is extremely positive with earnings per share estimated to rise from today’s level of ₹5.56 to ₹53.685 over the next three years. This results in an annual growth rate of 51.81%, on average, which indicates an exceedlingly positive future in the near term.

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

LUPIN is trading at a very high price-to-earnings (PE) ratio of 160.49x, meaning Lupin is overvalued based on current earnings compared to the pharmaceuticals industry average of 24.43x , and overvalued compared to the IN market average ratio of 21.55x .

NSEI:LUPIN PE PEG Gauge June 28th 18
NSEI:LUPIN PE PEG Gauge June 28th 18

After looking at LUPIN’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, to be able to properly assess the value of a high-growth stock such as Lupin, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 160.49x and expected year-on-year earnings growth of 51.81% give Lupin a quite high PEG ratio of 3.1x. So, when we include the growth factor in our analysis, Lupin appears overvalued , based on its fundamentals.

What this means for you:

LUPIN’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: Is LUPIN’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 LUPIN 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 LUPIN’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.

The easiest way to discover new investment ideas

Save hours of research when discovering your next investment with Simply Wall St. Looking for companies potentially undervalued based on their future cash flows? Or maybe you’re looking for sustainable dividend payers or high growth potential stocks. Customise your search to easily find new investment opportunities that match your investment goals. And the best thing about it? It’s FREE. Click here to learn more.