Does The Hype Around Ansaldo STS SpA’s (BIT:STS) Growth Justify Its August Share Price?

Growth expectations for Ansaldo STS SpA (BIT:STS) are high, but many investors are starting to ask whether its last close at €12.78 can still be rationalized by the future potential. 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 Ansaldo STS

What can we expect from Ansaldo STS in the future?

If you are bullish about Ansaldo STS’s growth potential then you are certainly not alone. The consensus forecast from 3 analysts is extremely bullish with earnings forecasted to rise significantly from today’s level of €0.317 to €0.544 over the next three years. This results in an annual growth rate of 15.30%, on average, which indicates an exceedlingly positive future in the near term.

Is STS’s share price justifiable by its earnings growth?

Ansaldo STS is looking rather expensive based on its price-to-earnings (PE) ratio of 40.3x. This illustrates that Ansaldo STS is overvalued compared to the IT market average ratio of 17.2x , and overvalued based on current earnings compared to the infrastructure industry average of 20.65x . This multiple is a median of profitable companies of 8 Infrastructure companies in IT including Autostrade Meridionali, ASTM and Società Iniziative Autostradali e Servizi.

BIT:STS PE PEG Gauge August 20th 18
BIT:STS PE PEG Gauge August 20th 18

We already know that STS appears to be overvalued when compared to its industry average. But, since Ansaldo STS is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 40.3x and expected year-on-year earnings growth of 15.30% give Ansaldo STS a quite high PEG ratio of 2.63x. Based on this growth, Ansaldo STS’s stock can be considered overvalued , based on fundamental analysis.

What this means for you:

STS’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 urge you to complete your research by taking a look at the following:

  1. Financial Health: Are STS’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 STS 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 STS’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.

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 editorial-team@simplywallst.com.