Is It Too Late To Buy Høland og Setskog Sparebank (OB:HSPG) At Its June Price?

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Høland og Setskog Sparebank (OB:HSPG) closed yesterday at NOK109, which left some investors asking whether the high earnings potential can still be justified at this price. Let’s look into this by assessing HSPG’s expected growth over the next few years.

See our latest analysis for Høland og Setskogrebank

How is HSPG going to perform in the future?

Høland og Setskogrebank is poised for extremely high earnings growth in the near future. Analyst consensus expectation is extremely bullish with earnings forecasted to rise significantly from today’s level of NOK12.002 to NOK13.339 over the next three years. On average, this leads to a growth rate of 40% each year, which indicates an exceedlingly positive future in the near term.

Can HSPG’s share price be justified by its earnings growth?

Høland og Setskogrebank is trading at quite low price-to-earnings (PE) ratio of 9.08x. This tells us the stock is undervalued relative to the current NO market average of 13.36x , and overvalued based on current earnings compared to the Banks industry average of 8.36x .

OB:HSPG Price Estimation Relative to Market, June 18th 2019
OB:HSPG Price Estimation Relative to Market, June 18th 2019

We already know that HSPG appears to be overvalued when compared to its industry average. But, seeing as Høland og Setskogrebank 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 9.08x and expected year-on-year earnings growth of 40% give Høland og Setskogrebank an extremely low PEG ratio of 0.23x. Based on this growth, Høland og Setskogrebank’s stock can be considered relatively cheap , based on fundamental analysis.

What this means for you:

HSPG’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 HSPG’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 HSPG 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 HSPG’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.