Does Sogn Sparebank’s (OB:SOGN) Stock Price Account For Its Growth?

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Sogn Sparebank (OB:SOGN) is considered a high-growth stock, but its last closing price of NOK102 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for Sognrebank

Exciting times ahead?

Sognrebank is poised for extremely high earnings growth in the near future. The consensus forecast from 2 analysts is extremely bullish with earnings per share estimated to surge from current levels of NOK11.129 to NOK11.82 over the next three years. On average, this leads to a growth rate of 45% each year, which indicates an exceedlingly positive future in the near term.

Is SOGN’s share price justified by its earnings growth?

Sognrebank is available at a price-to-earnings ratio of 9.16x, showing us it is undervalued relative to the current NO market average of 13.07x , and overvalued based on current earnings compared to the Banks industry average of 8.39x .

OB:SOGN Price Estimation Relative to Market, June 21st 2019
OB:SOGN Price Estimation Relative to Market, June 21st 2019

We already know that SOGN appears to be overvalued when compared to its industry average. But, since Sognrebank is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 9.16x and expected year-on-year earnings growth of 45% give Sognrebank an extremely low PEG ratio of 0.20x. Based on this growth, Sognrebank’s stock can be considered relatively cheap , based on fundamental analysis.

What this means for you:

SOGN’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 SOGN’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 SOGN 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 SOGN’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.