AMG Advanced Metallurgical Group NV. (ENXTAM:AMG) is considered a high growth stock. However its last closing price of €39 left investors wondering whether this growth has already been factored into the share price. 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 AMG Advanced Metallurgical Group
What can we expect from AMG in the future?One reason why investors are attracted to AMG is the high growth potential in the near future. The consensus forecast from 3 analysts is extremely positive with earnings per share estimated to surge from current levels of $1.948 to $4.959 over the next three years. This indicates an estimated earnings growth rate of 30.73% per year, on average, which signals a market-beating outlook in the upcoming years.
Can AMG’s share price be justified by its earnings growth?
As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” AMG Advanced Metallurgical Group is trading at price-to-earnings (PE) ratio of 24.24x, which tells us the stock is overvalued based on current earnings compared to the metals and mining industry average of 12.95x , and overvalued compared to the NL market average ratio of 18.5x .
We understand AMG seems to be overvalued based on its current earnings, compared to its industry peers. But, to properly examine the value of a high-growth stock such as AMG Advanced Metallurgical Group, 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 24.24x and expected year-on-year earnings growth of 30.73% give AMG Advanced Metallurgical Group a very low PEG ratio of 0.79x. This means that, when we account for AMG Advanced Metallurgical Group’s growth, the stock can be viewed as relatively cheap , based on its fundamentals.
What this means for you:
AMG’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: Is AMG’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 AMG 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 AMG’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.