Does Norwegian Finans Holding ASA’s (OB:NOFI) July Stock Price Reflect Its Future Growth?

Growth expectations for Norwegian Finans Holding ASA (OB:NOFI) are high, but many investors are starting to ask whether its last close at NOK99.5 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 Norwegian Finans Holding

What can we expect from Norwegian Finans Holding in the future?

Analysts are predicting good growth prospects for Norwegian Finans Holding over the next couple of years. Expectations from 3 analysts are certainly positive with earnings per share estimated to rise from today’s level of NOK8.988 to NOK13.068 over the next three years. On average, this leads to a growth rate of 12.64% each year, which signals a market-beating outlook in the upcoming years.

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

Norwegian Finans Holding is available at a price-to-earnings ratio of 11.07x, showing us it is undervalued relative to the current NO market average of 13.45x , and overvalued based on current earnings compared to the banks industry average of 9.28x . This multiple is a median of profitable companies of 25 Banks companies in NO including Sparebank 1 Nordvest, Surnadalrebank and LillestrømBanken.

OB:NOFI PE PEG Gauge July 31st 18
OB:NOFI PE PEG Gauge July 31st 18

We understand NOFI seems to be overvalued based on its current earnings, compared to its industry peers. But, since Norwegian Finans Holding is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 11.07x and expected year-on-year earnings growth of 12.64% give Norwegian Finans Holding a low PEG ratio of 0.88x. Based on this growth, Norwegian Finans Holding’s stock can be considered fairly valued , based on its fundamentals.

What this means for you:

NOFI’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: Is NOFI’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 NOFI 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 NOFI’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.