Your calculation regarding the PEG ratio (PE to earnings growth ratio) is a way to value stocks but of course a dangerous one with high growth stocks. The questions is what earnings growth rate will HANS in the future, not in the past.
My calculation is as follows. I assume that HANS will not be able to expand it's margin's any more (as it did in the past) since it's gross margins have already reached 50%, which is a good value for a beverage company. Subsequently the earnings growth rate will equal the revenue growth rate. I don't think that HANS will be able to grow as it has in the past,and think a forward growth rate of 15% is more reasonable. That by the way is higher than the analyst revenue growth rate estimate of 10% (per yahoo) (for whatever that is worth). From that perspective, HANS does not look cheap. So much depends on what growth you assume going forward, which is always a wild bet, IMO.
Incidentally, HANS is a stock i studied 2 years ago - i found it via a low price to book screen. Trading at around 4$, i put in a lowball bid, which never came to pass. Oh wey! The stock looked cheap but not a screaming buy back then, growth and earnings were fairly anemic and it's stock were way below the anyones radar screen. Could have, should have... |
