Is Ryman Healthcare Limited's (NZSE:RYM) Future Growth Already Accounted For In Today's Price?

Looking at Ryman Healthcare Limited’s (NZSE:RYM) fundamentals some investors are wondering if its last closing price of NZ$13.15 represents a good value for money for this high growth stock. Let’s look into this by assessing RYM's expected growth over the next few years.

View our latest analysis for Ryman Healthcare

What can we expect from RYM in the future?

According to the analysts covering the company, the following few years should bring about good growth prospects for Ryman Healthcare. Expectations from 6 analysts are buoyant with earnings per share estimated to surge from current levels of NZ$0.652 to NZ$1.051 over the next three years. This results in an annual growth rate of 15%, on average, which indicates a solid future in the near term.

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

RYM is available at a PE (price-to-earnings) ratio of 20.17x today, which tells us the stock is overvalued based on current earnings compared to the Healthcare industry average of 13.72x , and overvalued compared to the NZ market average ratio of 19.02x .

We already know that RYM appears to be overvalued when compared to its industry average. However, to properly examine the value of a high-growth stock such as Ryman Healthcare, 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 20.17x and expected year-on-year earnings growth of 15% give Ryman Healthcare a higher PEG ratio of 1.37x. This tells us that when we include its growth in our analysis Ryman Healthcare's stock can be considered slightly overvalued , based on its fundamentals.

What this means for you:

RYM'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:

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