Looking at HB Fuller Company’s (NYSE:FUL) fundamentals some investors are wondering if its last closing price of $53.12 represents a good value for money for this high growth stock. Below I will be talking through a basic metric which will help answer this question. See our latest analysis for H.B. Fuller
What can we expect from H.B. Fuller in the future?
One reason why investors are attracted to FUL is the high growth potential in the near future.
The consensus forecast from 7 analysts is
extremely positive
with earnings per share estimated to surge from current levels of
$1.807 to $4.718 over the next three years.
This indicates an estimated earnings growth rate of 17.78% per year, on average,
which indicates an exceedlingly positive future in the near term.
Can FUL’s share price be justified by its earnings growth?
Can FUL’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.” H.B. Fuller is trading at price-to-earnings (PE) ratio of 29.39x, which tells us the stock is overvalued based on current earnings compared to the chemicals industry average of 16.75x , and overvalued compared to the US market average ratio of 18.38x .
After looking at FUL’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, seeing as H.B. Fuller is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 29.39x and expected year-on-year earnings growth of 17.78% give H.B. Fuller a higher PEG ratio of 1.65x. This means that, when we account for H.B. Fuller’s growth, the stock can be viewed as a bit overvalued , based on the fundamentals.
What this means for you:
FUL’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: Is FUL’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 FUL 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 FUL’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.