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Total System Services, Inc. (NYSE: TSS) is considered a high-growth stock, but its latest closing price of $ 100.54 left some investors wondering whether this high potential for future earnings could be rationalized by its current price .
Below, I will talk about a basic metric that will help answer this question.
See our latest badysis for Total System Services
Has the TSS train slowed down?
Analysts expect good growth prospects for Total System Services over the next two years.
The consensus forecast of 23 badysts is
bullish
earnings per share is expected to increase from current levels of
$ 3.17 to $ 4.826 over the next three years.
This leads on average to a growth rate of 13% each year,
which indicates a solid future in the short term.
Can the share price of TSS be justified by the growth of its profits?
Total System Services is trading at a price / earnings ratio of 31.72x, which tells us that the stock is
overvalued compared to the average US market ratio of 18.17x
, and
undervalued based on its latest update of annual results compared to the computer average of 31.72x
.
The price / earnings ratio for Total System Services is 31.72, which is low compared to the industry average. This already suggests that the stock could be undervalued.
however,
To properly examine the value of a high growth security such as Total System Services, we must consider the growth of its earnings in the valuation. I find that the PEG ratio is simple but effective for this exercise.
A 31.72x PE ratio and 13% year-over-year expected earnings growth give Total System Services
a pretty high
PEG ratio 2.47x.
This means that when we take into account the growth of Total System Services, the stock can be considered as
overvalued
, based on the fundamentals.
What does this mean for you?
The current overvaluation of TSS could signal a potential sales opportunity to reduce your exposure to the security, or if you are a potential investor, the timing may not be well chosen to buy. However, basing your investment decision on one measure is certainly not enough. There are many things that I have not considered in this article and the PEG ratio is very one-dimensional.
If you have not already done it, I
highly recommend
To complete your search, take a look at the following:
- Financial health: Are TSS operations financially viable? Balance sheets can be difficult to badyze, which is why we have done it for you. Check out our financial health checks here.
- antecedents: Has TSS always been successful regardless of the ups and downs of the market? Go into more detail in past performance reviews and review the free visual representations of TSS history for clarity.
- Other performing stocks: Are there other stocks offering better prospects with proven track records? Explore our free list of these large stocks here.
Our goal is to provide you with a long-term research badysis based on fundamental data. Note that our badysis may not take into account the latest price sensitive business announcements or qualitative information.
If you notice an error that needs to be corrected, please contact the publisher at [email protected]. This article from Simply Wall St is of a general nature. This is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. Simply Wall St has no position on the actions mentioned. Thanks for the reading.
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