Looking at Signature Bank’s (NASDAQ:SBNY) fundamentals some investors are wondering if its last closing price of $125.35 represents a good value for money for this high growth stock. Let’s look into this by assessing SBNY’s expected growth over the next few years.
Has the SBNY train has slowed down?Investors in Signature Bank 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 16 analysts are buoyant with earnings per share estimated to rise from today’s level of $9.288 to $13.487 over the next three years. On average, this leads to a growth rate of 12% each year, which indicates a solid future in the near term.
Is SBNY available at a good price after accounting for its growth?
Signature Bank is trading at quite low price-to-earnings (PE) ratio of 13.5x. This tells us the stock is undervalued relative to the current US market average of 16.86x , and undervalued based on its latest annual earnings update compared to the Banks average of 14.18x .
Given that SBNY’s price-to-earnings of 13.5x lies below the industry average, this already indicates that the company could be potentially undervalued. But, to properly examine the value of a high-growth stock such as Signature Bank, 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 13.5x and expected year-on-year earnings growth of 12% give Signature Bank an acceptable PEG ratio of 1.16x. Based on this growth, Signature Bank’s stock can be considered slightly overvalued , based on the fundamentals.
What this means for you:
SBNY’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: Are SBNY’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 SBNY 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 SBNY’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.