PGT Innovations Inc (NYSE:PGTI) is considered a high-growth stock, but its last closing price of $21.78 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s take a look at some key metrics to determine whether there's any value here for current and potential future investors.
Check out our latest analysis for Innovations
Where's the growth?
Innovations's extremely high growth potential in the near future is attracting investors. The consensus forecast from 8 analysts is extremely positive with earnings per share estimated to surge from current levels of $1.132 to $1.741 over the next three years. This indicates an estimated earnings growth rate of 18% per year, on average, which signals a market-beating outlook in the upcoming years.
Is PGTI's share price justified by its earnings growth?
PGTI is available at a PE (price-to-earnings) ratio of 19.24x today, which tells us the stock is overvalued based on current earnings compared to the building industry average of 17.94x , and overvalued compared to the US market average ratio of 18.97x . This multiple is a median of profitable companies of 24 Building companies in US including Masonite International, Patrick Industries and Universal Forest Products.
We already know that PGTI appears to be overvalued when compared to its industry average. However, since Innovations is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 19.24x and expected year-on-year earnings growth of 18% give Innovations an acceptable PEG ratio of 1.09x. This tells us that when we include its growth in our analysis Innovations's stock can be considered slightly overvalued , based on fundamental analysis.
What this means for you:
PGTI'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 PGTI’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 PGTI 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 PGTI'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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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 editorial-team@simplywallst.com.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.