Helgeland Sparebank (OB:HELG) is considered a high growth stock. However its last closing price of NOK76 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing HELG’s expected growth over the next few years.
Has the HELG train slowed down?
According to the analysts covering the company, the following few years should bring about good growth prospects for Helgelandrebank. Expectations from 3 analysts are certainly positive with earnings per share estimated to rise from today’s level of NOK5.821 to NOK11.591 over the next three years. On average, this leads to a growth rate of 14% each year, which indicates a solid future in the near term.
Is HELG’s share price justifiable by its earnings growth?
Helgelandrebank is available at a price-to-earnings ratio of 13.06x, showing us it is undervalued relative to the current NO market average of 13.23x , and overvalued based on current earnings compared to the Banks industry average of 7.86x .
After looking at HELG’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, to properly examine the value of a high-growth stock such as Helgelandrebank, 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 13.06x and expected year-on-year earnings growth of 14% give Helgelandrebank a low PEG ratio of 0.96x. This tells us that when we include its growth in our analysis Helgelandrebank’s stock can be considered fairly valued , based on its fundamentals.
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:
- 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.
- 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.
- 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.
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