Does IRadimed Corporation's (NASDAQ:IRMD) Stock Price Account For Its Growth?

IRadimed Corporation (NASDAQ:IRMD) is considered a high growth stock. However its last closing price of $23.07 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there's any value here for current and potential future investors.

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

View our latest analysis for IRadimed

Can we expect IRMD to keep growing?

IRadimed is poised for extremely high earnings growth in the near future. Expectations from 2 analysts are extremely positive with earnings per share estimated to rise from today's level of $0.673 to $1.144 over the next three years. This results in an annual growth rate of 31%, on average, which signals a market-beating outlook in the upcoming years.

Can IRMD's share price be justified by its earnings growth?

IRadimed is trading at price-to-earnings (PE) ratio of 34.3x, this tells us the stock is overvalued compared to the US market average ratio of 17.89x , and undervalued based on its latest annual earnings update compared to the Medical Equipment average of 38.66x .

Given that IRMD's price-to-earnings of 34.3x lies below the industry average, this already indicates that the company could be potentially undervalued. However, to be able to properly assess the value of a high-growth stock such as IRadimed, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock's valuation. A PE ratio of 34.3x and expected year-on-year earnings growth of 31% give IRadimed an acceptable PEG ratio of 1.11x. So, when we include the growth factor in our analysis, IRadimed appears slightly overvalued , based on the fundamentals.

What this means for you:

IRMD'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 IRMD’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 IRMD 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 IRMD'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.