Does HNI Corporation’s (NYSE:HNI) Stock Price Account For Its Growth?

Looking at HNI Corporation’s (NYSE:HNI) fundamentals some investors are wondering if its last closing price of $37.09 represents a good value for money for this high growth stock. 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 HNI

What can we expect from HNI in the future?

According to the analysts covering the company, the following few years should bring about good growth prospects for HNI. Expectations from 3 analysts are certainly positive with earnings per share estimated to surge from current levels of $2.14 to $3.33 over the next three years. On average, this leads to a growth rate of 11% each year, which indicates a solid future in the near term.

Can HNI’s share price be justified by its earnings growth?

As the legendary value investor Ben Graham once said, “Price is what you pay, value is what you get.” HNI is trading at price-to-earnings (PE) ratio of 17.33x, which tells us the stock is undervalued based on its latest annual earnings update compared to the Commercial Services average of 20.79x , and undervalued relative to the current US market average of 18.06x .

NYSE:HNI Price Estimation Relative to Market, April 11th 2019
NYSE:HNI Price Estimation Relative to Market, April 11th 2019

We already know that HNI appears to be undervalued based on its PE ratio, compared to the industry average. But, to properly examine the value of a high-growth stock such as HNI, 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 17.33x and expected year-on-year earnings growth of 11% give HNI a higher PEG ratio of 1.62x. This means that, when we account for HNI’s growth, the stock can be viewed as a bit overvalued , based on its fundamentals.

What this means for you:

HNI’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:

  1. Financial Health: Are HNI’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 HNI 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 HNI’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.