Is Sparebanken Møre’s (OB:MORG) Future Growth Already Accounted For In Today’s Price?

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Growth expectations for Sparebanken Møre (OB:MORG) are high, but many investors are starting to ask whether its last close at NOK318 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question.

See our latest analysis for Sparebanken Møre

What can we expect from Sparebanken Møre in the future?

Investors in Sparebanken Møre 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 buoyant with earnings per share estimated to rise from today’s level of NOK30.941 to NOK34.927 over the next three years. On average, this leads to a growth rate of 13% each year, which indicates a solid future in the near term.

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

Sparebanken Møre is trading at quite low price-to-earnings (PE) ratio of 10.28x. This tells us the stock is undervalued relative to the current NO market average of 13.86x , and overvalued based on current earnings compared to the Banks industry average of 8.44x .

OB:MORG Price Estimation Relative to Market, July 10th 2019
OB:MORG Price Estimation Relative to Market, July 10th 2019

We already know that MORG appears to be overvalued when compared to its industry average. But, to properly examine the value of a high-growth stock such as Sparebanken Møre, 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 10.28x and expected year-on-year earnings growth of 13% give Sparebanken Møre a very low PEG ratio of 0.78x. Based on this growth, Sparebanken Møre’s stock can be considered relatively cheap , based on fundamental analysis.

What this means for you:

MORG’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 highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are MORG’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 MORG 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 MORG’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.