Does The Hype Around Zebra Technologies Corporation's (NASDAQ:ZBRA) Growth Justify Its August Share Price?

Growth expectations for Zebra Technologies Corporation (NASDAQ:ZBRA) are high, but many investors are starting to ask whether its last close at $204.26 can still be rationalized by the future potential. Let’s look into this by assessing ZBRA's expected growth over the next few years.

View our latest analysis for Zebra Technologies

What can we expect from Zebra Technologies in the future?

Investors in Zebra Technologies 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. The consensus forecast from 10 analysts is certainly positive with earnings per share estimated to surge from current levels of $8.929 to $12.422 over the next three years. On average, this leads to a growth rate of 12% each year, which illustrates an optimistic outlook in the near term.

Is ZBRA's share price justified by its earnings growth?

ZBRA is available at a PE (price-to-earnings) ratio of 22.88x today, which tells us the stock is overvalued based on current earnings compared to the Electronic industry average of 18.48x , and overvalued compared to the US market average ratio of 17.68x .

After looking at ZBRA's value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, since Zebra Technologies is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 22.88x and expected year-on-year earnings growth of 12% give Zebra Technologies a higher PEG ratio of 1.96x. Based on this growth, Zebra Technologies's stock can be considered a bit overvalued , based on the fundamentals.

What this means for you:

ZBRA'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: Are ZBRA’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 ZBRA 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 ZBRA'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.