eToro Group (ETOR): Assessing Valuation After a Recent Short-Term Share Price Rebound

eToro Group (ETOR) has quietly delivered a mixed stretch for shareholders, with the stock up around 14% over the past month but still down sharply year to date, setting up an interesting reset in expectations.

See our latest analysis for eToro Group.

That recent 30 day share price return of 14.42% looks more like a short term rebound within a tougher backdrop. The latest $41.73 share price still reflects a year to date share price return of negative 37.72% and a market that is reassessing both eToro Group’s growth potential and risk profile.

If eToro’s volatility has you thinking about diversification, this could be a good moment to explore fast growing stocks with high insider ownership for other high conviction ideas backed by insiders.

With shares still down heavily this year despite a sizable gap to analyst targets, investors face a key question: is eToro Group now trading below its true earnings and growth potential, or is the market already discounting its future?

Price-to-Earnings of 16.9x: Is it justified?

On a price-to-earnings ratio of 16.9x at the last close of $41.73, eToro Group screens as modestly undervalued relative to both its own fair ratio and peers.

The price-to-earnings multiple compares the company’s current share price to its per share earnings, making it a direct way to gauge how much investors are paying for each dollar of profit. This is especially relevant for a profitable, growing capital markets platform like eToro.

Against our estimated fair price-to-earnings of 19.5x, the current 16.9x suggests the market is not fully pricing in its earnings profile, especially given that earnings have grown 42.3% per year over the past five years and are forecast to grow around the high teens annually.

Relative to the US Capital Markets industry average multiple of 23.8x and a peer average of 17.6x, eToro’s discount looks meaningful rather than marginal. This points to a valuation that could reasonably move closer to the fair ratio level if its growth trajectory holds.

Explore the SWS fair ratio for eToro Group

Result: Price-to-Earnings of 16.9x (UNDERVALUED)

However, revenue contraction and the highly competitive trading landscape could quickly derail optimism if user growth stalls or regulatory pressures intensify.

Find out about the key risks to this eToro Group narrative.

Another View: Our DCF Fair Value Check

Our DCF model paints a similar picture, putting eToro Group’s fair value at about $43.37, just 3.8% above the current $41.73 price. That is a small cushion, not a screaming bargain, so how much faith should investors place in such a narrow margin of safety?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out eToro Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 926 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own eToro Group Narrative

If you would rather dig into the numbers yourself and shape your own view of eToro Group, you can build a full narrative in minutes, Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding eToro Group.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.

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