Norway Royal Salmon AS (OB:NRS) is considered a high growth stock. However its last closing price of NOK197.4 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing NRS’s expected growth over the next few years.
Can we expect NRS to keep growing?
One reason why investors are attracted to NRS is the high growth potential in the near future. The consensus forecast from 6 analysts is extremely positive with earnings per share estimated to surge from current levels of NOK13.644 to NOK22.21 over the next three years. This results in an annual growth rate of 18%, on average, which illustrates a highly optimistic outlook in the near term.
Is NRS’s share price justifiable by its earnings growth?
Stocks like Norway Royal Salmon, with a price-to-earnings (P/E) ratio of 14.47x, 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 NRS is overvalued compared to the NO market average ratio of 13.2x , and overvalued based on current earnings compared to the Food industry average of 13.95x .
After looking at NRS’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, to properly examine the value of a high-growth stock such as Norway Royal Salmon, 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 14.47x and expected year-on-year earnings growth of 18% give Norway Royal Salmon a low PEG ratio of 0.80x. So, when we include the growth factor in our analysis, Norway Royal Salmon appears fairly valued , based on the fundamentals.
What this means for you:
NRS’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:
- Financial Health: Are NRS’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.
- Past Track Record: Has NRS 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 NRS’s historicals for more clarity.
- 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.