Have Investors Priced In Aperam S.A.’s (AMS:APAM) Growth?

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Aperam S.A. (AMS:APAM) closed yesterday at €24.6, which left some investors asking whether the high earnings potential can still be justified at this price. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for Aperam

How is APAM going to perform in the future?

The excitement around Aperam’s growth potential is not unfounded. The consensus forecast from 12 analysts is extremely positive with earnings per share estimated to rise from today’s level of €2.694 to €3.289 over the next three years. This indicates an estimated earnings growth rate of 17% per year, on average, which indicates an exceedlingly positive future in the near term.

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

Aperam is available at a price-to-earnings ratio of 9.13x, showing us it is undervalued relative to the current NL market average of 17.36x , and undervalued based on its latest annual earnings update compared to the Metals and Mining average of 9.96x .

ENXTAM:APAM Price Estimation Relative to Market, June 27th 2019
ENXTAM:APAM Price Estimation Relative to Market, June 27th 2019

Given that APAM’s price-to-earnings of 9.13x lies below the industry average, this already indicates that the company could be potentially undervalued. But, since Aperam is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 9.13x and expected year-on-year earnings growth of 17% give Aperam a very low PEG ratio of 0.54x. This means that, when we account for Aperam’s growth, the stock can be viewed as relatively cheap , based on the fundamentals.

What this means for you:

APAM’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:

  1. Financial Health: Are APAM’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 APAM 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 APAM’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.