Growth expectations for The Bank of Princeton (NASDAQ:BPRN) are high, but many investors are starting to ask whether its last close at $30.79 can still be rationalized by the future potential. Let’s look into this by assessing BPRN’s expected growth over the next few years.
Where’s the growth?According to the analysts covering the company, the following few years should bring about good growth prospects for Bank of Princeton. The consensus forecast from 3 analysts is certainly positive with earnings per share estimated to rise from today’s level of $1.885 to $2.649 over the next three years. On average, this leads to a growth rate of 15% each year, which illustrates an optimistic outlook in the near term.
Is BPRN’s share price justifiable by its earnings growth?
Bank of Princeton is trading at quite low price-to-earnings (PE) ratio of 16.33x. This tells us the stock is undervalued relative to the current US market average of 20.13x , and undervalued based on its latest annual earnings update compared to the banks average of 17.83x . This multiple is a median of profitable companies of 25 Banks companies in US including Great Basin Financial, CIB Marine Bancshares and Citizens Commerce Bancshares.
Given that BPRN’s price-to-earnings of 16.33x lies below the industry average, this already indicates that the company could be potentially undervalued. However, since Bank of Princeton is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 16.33x and expected year-on-year earnings growth of 15% give Bank of Princeton an acceptable PEG ratio of 1.11x. This tells us that when we include its growth in our analysis Bank of Princeton’s stock can be considered slightly overvalued , based on its fundamentals.
What this means for you:
BPRN’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 BPRN’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 BPRN 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 BPRN’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.
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 email@example.com.