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Saia, Inc. (NASDAQ:SAIA) closed yesterday at $69.11, which left some investors asking whether the high earnings potential can still be justified at this price. Let’s look into this by assessing SAIA’s expected growth over the next few years.
See our latest analysis for Saia
Where’s the growth?
Analysts are predicting good growth prospects for Saia over the next couple of years. Expectations from 10 analysts are bullish with earnings per share estimated to surge from current levels of $4.075 to $6.147 over the next three years. This results in an annual growth rate of 13%, on average, which signals a market-beating outlook in the upcoming years.Can SAIA’s share price be justified by its earnings growth?
Saia is available at a price-to-earnings ratio of 16.96x, showing us it is undervalued relative to the current US market average of 17.46x , and undervalued based on its latest annual earnings update compared to the Transportation average of 18.07x .
Saia’s price-to-earnings ratio stands at 16.96x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, to properly examine the value of a high-growth stock such as Saia, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 16.96x and expected year-on-year earnings growth of 13% give Saia a higher PEG ratio of 1.28x. This tells us that when we include its growth in our analysis Saia’s stock can be considered slightly overvalued , based on its fundamentals.
What this means for you:
SAIA’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:
- Financial Health: Are SAIA’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 SAIA 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 SAIA’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.
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.