Looking at Sbanken ASA’s (OB:SBANK) fundamentals some investors are wondering if its last closing price of NOK78.8 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
What can we expect from Sbanken in the future?According to the analysts covering the company, the following few years should bring about good growth prospects for Sbanken. The consensus forecast from 5 analysts is certainly positive with earnings forecasted to rise significantly from today’s level of NOK6.455 to NOK8.402 over the next three years. On average, this leads to a growth rate of 10.77% each year, which indicates a solid future in the near term.
Is SBANK available at a good price after accounting for its growth?
Stocks like Sbanken, with a price-to-earnings (P/E) ratio of 12.21x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that SBANK 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.
After looking at SBANK’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 Sbanken, 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 12.21x and expected year-on-year earnings growth of 10.77% give Sbanken an acceptable PEG ratio of 1.13x. This means that, when we account for Sbanken’s growth, the stock can be viewed as slightly overvalued , based on the fundamentals.
What this means for you:
SBANK’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not 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: Is SBANK’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 SBANK 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 SBANK’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.
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 firstname.lastname@example.org.