Fisher & Paykel Healthcare Corporation Limited (NZSE:FPH) is considered a high growth stock. However its last closing price of NZ$15.4 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
Can we expect FPH to keep growing?Investors in Fisher & Paykel Healthcare have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 9 analysts are certainly positive with earnings forecasted to rise significantly from today’s level of NZ$0.361 to NZ$0.535 over the next three years. This results in an annual growth rate of 15%, on average, which illustrates an optimistic outlook in the near term.
Is FPH’s share price justified by its earnings growth?
Fisher & Paykel Healthcare is trading at price-to-earnings (PE) ratio of 42.66x, this tells us the stock is overvalued compared to the NZ market average ratio of 16.99x , and overvalued based on current earnings compared to the Medical Equipment industry average of 36.54x .
After looking at FPH’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, since Fisher & Paykel Healthcare is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 42.66x and expected year-on-year earnings growth of 15% give Fisher & Paykel Healthcare a quite high PEG ratio of 2.91x. So, when we include the growth factor in our analysis, Fisher & Paykel Healthcare appears overvalued , based on its fundamentals.
What this means for you:
FPH’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 highly recommend you to complete your research by taking a look at the following:
- Financial Health: Are FPH’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 FPH 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 FPH’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.