Growth expectations for Meridian Bioscience, Inc. (NASDAQ:VIVO) are high, but many investors are starting to ask whether its last close at $16.5 can still be rationalized by the future potential. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
Has the VIVO train has slowed down?Investors in Meridian Bioscience 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 4 analysts are certainly positive with earnings per share estimated to rise from today’s level of $0.605 to $0.833 over the next three years. On average, this leads to a growth rate of 11% each year, which illustrates an optimistic outlook in the near term.
Is VIVO’s share price justified by its earnings growth?
Meridian Bioscience is available at price-to-earnings ratio of 27.25x, showing us it is undervalued based on its latest annual earnings update compared to the Medical Equipment average of 39.02x , and overvalued compared to the US market average ratio of 17.61x .
Given that VIVO’s price-to-earnings of 27.25x lies below the industry average, this already indicates that the company could be potentially undervalued. However, since Meridian Bioscience is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 27.25x and expected year-on-year earnings growth of 11% give Meridian Bioscience a quite high PEG ratio of 2.53x. This tells us that when we include its growth in our analysis Meridian Bioscience’s stock can be considered overvalued , based on its fundamentals.
What this means for you:
VIVO’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:
- Financial Health: Are VIVO’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 VIVO 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 VIVO’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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.