Does The Hype Around Helgeland Sparebank’s (OB:HELG) Growth Justify Its October Share Price?

Helgeland Sparebank (OB:HELG) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of NOK77 is based on unrealistic expectations. Below I will be talking through a basic metric which will help answer this question.

See our latest analysis for Helgelandrebank

What can we expect from Helgelandrebank in the future?

Investors in Helgelandrebank have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. The consensus forecast from 4 analysts is bullish with earnings per share estimated to rise from today’s level of NOK8.783 to NOK11.737 over the next three years. This indicates an estimated earnings growth rate of 13% per year, on average, which indicates a solid future in the near term.

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

Helgelandrebank is available at a price-to-earnings ratio of 8.77x, showing us it is undervalued relative to the current NO market average of 13.53x , and overvalued based on current earnings compared to the banks industry average of 8.64x . This multiple is a median of profitable companies of 24 Banks companies in NO including Sparebank 1 Nordvest, Surnadalrebank and LillestrømBanken.

OB:HELG PE PEG Gauge October 31st 18
OB:HELG PE PEG Gauge October 31st 18

After looking at HELG’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, seeing as Helgelandrebank 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 8.77x and expected year-on-year earnings growth of 13% give Helgelandrebank a very low PEG ratio of 0.67x. Based on this growth, Helgelandrebank’s stock can be considered relatively cheap , based on fundamental analysis.

What this means for you:

HELG’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 HELG’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 HELG 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 HELG’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.