Is P/F Bakkafrost (OB:BAKKA) Undervalued After Accounting For Its Future Growth?

P/F Bakkafrost (OB:BAKKA) is considered a high-growth stock, but its last closing price of NOK481.6 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s take a look at some key metrics to determine whether there's any value here for current and potential future investors.

View our latest analysis for P/F Bakkafrost

Has the BAKKA train has slowed down?

Analysts are predicting good growth prospects for P/F Bakkafrost over the next couple of years. Expectations from 7 analysts are bullish with earnings forecasted to rise significantly from today's level of DKK14.496 to DKK26.451 over the next three years. This results in an annual growth rate of 11.02%, on average, which signals a market-beating outlook in the upcoming years.

Is BAKKA's share price justified by its earnings growth?

BAKKA is trading at price-to-earnings (PE) ratio of 25.71x, which suggests that P/F Bakkafrost is overvalued based on current earnings compared to the food industry average of 16.06x , and overvalued compared to the NO market average ratio of 13.52x . This multiple is a median of profitable companies of 11 Food companies in NO including Scottish Salmon, Grieg Seafood and Lerøy Seafood Group.

We already know that BAKKA appears to be overvalued when compared to its industry average. But, since P/F Bakkafrost is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 25.71x and expected year-on-year earnings growth of 11.02% give P/F Bakkafrost a quite high PEG ratio of 2.33x. Based on this growth, P/F Bakkafrost's stock can be considered overvalued , based on fundamental analysis.

What this means for you:

BAKKA's current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you're a potential investor, now may not 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 urge you to complete your research by taking a look at the following:

1. Financial Health: Are BAKKA’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 BAKKA 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 BAKKA'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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.