SVB Financial Group (NASDAQ:SIVB) is considered a high growth stock. However its last closing price of $245.53 left investors wondering whether this growth has already been factored into the share price. Below I will be talking through a basic metric which will help answer this question.
Check out our latest analysis for SVB Financial Group
Where’s the growth?
Analysts are predicting good growth prospects for SVB Financial Group over the next couple of years. Expectations from 18 analysts are buoyant with earnings per share estimated to surge from current levels of $18.347 to $25.203 over the next three years. This results in an annual growth rate of 10%, on average, which signals a market-beating outlook in the upcoming years.Is SIVB available at a good price after accounting for its growth?
Stocks like SVB Financial Group, with a price-to-earnings (P/E) ratio of 13.38x, 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 SIVB is undervalued relative to the current US market average of 17.69x , and overvalued based on current earnings compared to the Banks industry average of 13.22x .
After looking at SIVB’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, seeing as SVB Financial Group 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 13.38x and expected year-on-year earnings growth of 10% give SVB Financial Group a higher PEG ratio of 1.3x. Based on this growth, SVB Financial Group’s stock can be considered slightly overvalued , based on fundamental analysis.
What this means for you:
SIVB’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 SIVB’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 SIVB 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 SIVB’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.
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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.