TC PipeLines LP (NYSE:TCP): Can Growth Justify Its May Share Price?

Looking at TC PipeLines LP’s (NYSE:TCP) fundamentals some investors are wondering if its last closing price of $35.55 represents a good value for money for this high growth stock. Let’s look into this by assessing TCP's expected growth over the next few years. See our latest analysis for TC PipeLines

Where's the growth?

Investors in TC PipeLines 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 6 analysts are bullish with earnings per share estimated to surge from current levels of $3.165 to $3.518 over the next three years. On average, this leads to a growth rate of 10.24% each year, which illustrates an optimistic outlook in the near term.

Is TCP's share price justifiable by its earnings growth?

TC PipeLines is available at a price-to-earnings ratio of 11.23x, showing us it is undervalued relative to the current US market average of 18.27x , and undervalued based on its latest annual earnings update compared to the oil and gas average of 13.31x .

TC PipeLines's price-to-earnings ratio stands at 11.23x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, since TC PipeLines is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 11.23x and expected year-on-year earnings growth of 10.24% give TC PipeLines an acceptable PEG ratio of 1.1x. This tells us that when we include its growth in our analysis TC PipeLines's stock can be considered slightly overvalued , based on the fundamentals.

What this means for you:

TCP'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:

1. Financial Health: Is TCP’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 TCP 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 TCP'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.

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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.