Is Totens Sparebank’s (OB:TOTG) Growth Strong Enough To Justify Its June Share Price?

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Looking at Totens Sparebank’s (OB:TOTG) fundamentals some investors are wondering if its last closing price of NOK124 represents a good value for money for this high growth stock. Below I will be talking through a basic metric which will help answer this question.

Check out our latest analysis for Totensrebank

Where’s the growth?

Totensrebank’s growth potential is very attractive. Expectations from 2 analysts are extremely bullish with earnings per share estimated to surge from current levels of NOK15.689 to NOK15.821 over the next three years. This indicates an estimated earnings growth rate of 19% per year, on average, which signals a market-beating outlook in the upcoming years.

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

Totensrebank is trading at quite low price-to-earnings (PE) ratio of 7.9x. This tells us the stock is undervalued relative to the current NO market average of 13.35x , and undervalued based on its latest annual earnings update compared to the Banks average of 8.51x .

OB:TOTG Price Estimation Relative to Market, June 14th 2019
OB:TOTG Price Estimation Relative to Market, June 14th 2019

Totensrebank’s price-to-earnings ratio stands at 7.9x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, to properly examine the value of a high-growth stock such as Totensrebank, 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 7.9x and expected year-on-year earnings growth of 19% give Totensrebank an extremely low PEG ratio of 0.43x. Based on this growth, Totensrebank’s stock can be considered relatively cheap , based on the fundamentals.

What this means for you:

TOTG’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 TOTG’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 TOTG 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 TOTG’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.