Is It Too Late To Buy Persistent Systems Limited (NSE:PERSISTENT) At Its May Price?

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Looking at Persistent Systems Limited’s (NSE:PERSISTENT) fundamentals some investors are wondering if its last closing price of ₹636.25 represents a good value for money for this high growth stock. Below I will be talking through a basic metric which will help answer this question.

Check out our latest analysis for Persistent Systems

What can we expect from Persistent Systems in the future?

According to the analysts covering the company, the following few years should bring about good growth prospects for Persistent Systems. Expectations from 21 analysts are certainly positive with earnings per share estimated to surge from current levels of ₹43.991 to ₹53.576 over the next three years. On average, this leads to a growth rate of 11% each year, which illustrates an optimistic outlook in the near term.

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

Persistent Systems is available at a price-to-earnings ratio of 14.53x, showing us it is undervalued relative to the current IN market average of 15.84x , and undervalued based on its latest annual earnings update compared to the IT average of 15.95x .

NSEI:PERSISTENT Price Estimation Relative to Market, May 1st 2019
NSEI:PERSISTENT Price Estimation Relative to Market, May 1st 2019

Persistent Systems’s price-to-earnings ratio stands at 14.53x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, seeing as Persistent Systems is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 14.53x and expected year-on-year earnings growth of 11% give Persistent Systems a higher PEG ratio of 1.38x. This tells us that when we include its growth in our analysis Persistent Systems’s stock can be considered slightly overvalued , based on its fundamentals.

What this means for you:

PERSISTENT’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 PERSISTENT’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 PERSISTENT 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 PERSISTENT’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.