Is TGS-NOPEC Geophysical Company ASA’s (OB:TGS) Stock Available For A Good Price After Accounting For Growth?

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Looking at TGS-NOPEC Geophysical Company ASA’s (OB:TGS) fundamentals some investors are wondering if its last closing price of NOK237.9 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.

See our latest analysis for TGS-NOPEC Geophysical

Can we expect TGS to keep growing?

If you are bullish about TGS-NOPEC Geophysical’s growth potential then you are certainly not alone. The consensus forecast from 9 analysts is extremely bullish with earnings per share estimated to rise from today’s level of $1.727 to $2.639 over the next three years. This results in an annual growth rate of 21%, on average, which indicates an exceedlingly positive future in the near term.

Is TGS available at a good price after accounting for its growth?

TGS-NOPEC Geophysical is available at a price-to-earnings ratio of 16.06x, showing us it is overvalued compared to the NO market average ratio of 13.07x , and undervalued based on its latest annual earnings update compared to the Energy Services average of 16.59x .

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

Given that TGS’s price-to-earnings of 16.06x lies below the industry average, this already indicates that the company could be potentially undervalued. But, to be able to properly assess the value of a high-growth stock such as TGS-NOPEC Geophysical, 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 16.06x and expected year-on-year earnings growth of 21% give TGS-NOPEC Geophysical a very low PEG ratio of 0.78x. So, when we include the growth factor in our analysis, TGS-NOPEC Geophysical appears relatively cheap , based on the fundamentals.

What this means for you:

TGS’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 TGS’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 TGS 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 TGS’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.