SpareBank 1 Østlandet (OB:SPOL): Can Growth Justify Its April Share Price?

Looking at SpareBank 1 Østlandet’s (OB:SPOL) fundamentals some investors are wondering if its last closing price of NOK83.1 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.

See our latest analysis for SpareBank 1 Østlandet

Can we expect SPOL to keep growing?

SpareBank 1 Østlandet’s growth potential is very attractive. The consensus forecast from 4 analysts is extremely bullish with earnings per share estimated to surge from current levels of NOK8.463 to NOK11.496 over the next three years. On average, this leads to a growth rate of 16% each year, which signals a market-beating outlook in the upcoming years.

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

Stocks like SpareBank 1 Østlandet, with a price-to-earnings (P/E) ratio of 9.82x, 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 SPOL is undervalued relative to the current NO market average of 13.53x , and overvalued based on current earnings compared to the Banks industry average of 8.94x .

OB:SPOL Price Estimation Relative to Market, April 3rd 2019
OB:SPOL Price Estimation Relative to Market, April 3rd 2019

After looking at SPOL’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, to be able to properly assess the value of a high-growth stock such as SpareBank 1 Østlandet, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 9.82x and expected year-on-year earnings growth of 16% give SpareBank 1 Østlandet a very low PEG ratio of 0.61x. Based on this growth, SpareBank 1 Østlandet’s stock can be considered relatively cheap , based on its fundamentals.

What this means for you:

SPOL’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 SPOL’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 SPOL 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 SPOL’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.