Autoliv Inc (NYSE:ALV) is considered a high-growth stock, but its last closing price of $157.44 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s look into this by assessing ALV’s expected growth over the next few years. Check out our latest analysis for Autoliv
What can we expect from Autoliv in the future?Autoliv’s extremely high growth potential in the near future is attracting investors. The consensus forecast from 33 analysts is extremely bullish with earnings forecasted to rise significantly from today’s level of $4.703 to $10.548 over the next three years. This indicates an estimated earnings growth rate of 18.74% per year, on average, which indicates an exceedlingly positive future in the near term.
Is ALV’s share price justified by its earnings growth?
Autoliv is looking rather expensive based on its price-to-earnings (PE) ratio of 33.48x. This illustrates that Autoliv is overvalued compared to the US market average ratio of 18.54x , and overvalued based on current earnings compared to the auto components industry average of 15.09x .
After looking at ALV’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, seeing as Autoliv is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 33.48x and expected year-on-year earnings growth of 18.74% give Autoliv a higher PEG ratio of 1.79x. So, when we include the growth factor in our analysis, Autoliv appears a bit overvalued , based on fundamental analysis.
What this means for you:
ALV’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:
- Financial Health: Is ALV’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 ALV 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 ALV’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.