Is Level One Bancorp, Inc.’s (NASDAQ:LEVL) Growth Strong Enough To Justify Its August Share Price?

Looking at Level One Bancorp, Inc.’s (NASDAQ:LEVL) fundamentals some investors are wondering if its last closing price of $23.7 represents a good value for money for this high growth stock. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for Level One Bancorp

What are the future expectations?

Level One Bancorp is poised for significantly high earnings growth in the near future. The consensus forecast from 4 analysts is extremely bullish with earnings per share estimated to surge from current levels of $1.842 to $2.689 over the next three years. This results in an annual growth rate of 19%, on average, which signals a market-beating outlook in the upcoming years.

Is LEVL’s share price justified by its earnings growth?

Stocks like Level One Bancorp, with a price-to-earnings (P/E) ratio of 12.86x, 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 LEVL is undervalued relative to the current US market average of 17.36x , and overvalued based on current earnings compared to the Banks industry average of 12.31x .

NasdaqGS:LEVL Price Estimation Relative to Market, August 20th 2019
NasdaqGS:LEVL Price Estimation Relative to Market, August 20th 2019

After looking at LEVL’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, to properly examine the value of a high-growth stock such as Level One Bancorp, 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 12.86x and expected year-on-year earnings growth of 19% give Level One Bancorp a very low PEG ratio of 0.67x. This tells us that when we include its growth in our analysis Level One Bancorp’s stock can be considered relatively cheap , based on the fundamentals.

What this means for you:

LEVL’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:

  1. Financial Health: Are LEVL’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 LEVL 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 LEVL’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.