Is It Too Late To Buy Sogn Sparebank (OB:SOGN) At Its June Price?

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Sogn Sparebank (OB:SOGN) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of NOK102 is based on unrealistic expectations. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

See our latest analysis for Sognrebank

How is SOGN going to perform in the future?

Sognrebank’s growth potential is very attractive. The consensus forecast from 2 analysts is extremely positive with earnings per share estimated to rise from today’s level of NOK11.129 to NOK11.82 over the next three years. This results in an annual growth rate of 45%, on average, which indicates an exceedlingly positive future in the near term.

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

Stocks like Sognrebank, with a price-to-earnings (P/E) ratio of 9.16x, 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 SOGN 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 understand SOGN seems to be overvalued based on its current earnings, compared to its industry peers. However, seeing as Sognrebank 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 9.16x and expected year-on-year earnings growth of 45% give Sognrebank an extremely low PEG ratio of 0.20x. This tells us that when we include its growth in our analysis Sognrebank’s stock can be considered relatively cheap , based on its fundamentals.

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.