Is the stock of Plug Power overvalued or undervalued?
Plug Power Inc (NASDAQ: PLUG) stocks lagged the S&P 500 in 2021, generating a cumulative total return of 18%.
Plug shares have seen a wild ride in 2021, but investors may wonder if there is value to be found in Plug shares.
Earnings: A price-to-earnings (PE) ratio is one of the most basic fundamental measures to assess the value of a stock. The lower the PE, the higher the value.
For comparison, the S&P 500 PE is currently around 29, almost double its long-term average of 15.9. Plug currently does not have a PE ratio because the business is not profitable. In the last quarter, Plug reported a net loss of $ 99.6 million.
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Growth: Looking ahead to the next four quarters, the S&P 500 futures PE ratio looks much more reasonable at just 20.6. Unfortunately, analysts don’t expect Plug to make a profit in the next four quarters. Plug’s current consensus estimate of earnings per share for 2022 is a loss per share of 21 cents. Plug’s industrial peers are currently averaging an expected earnings multiple of 21.3.
However, when it comes to valuing a stock, profits aren’t everything.
Growth rate is also critical for businesses that build their bottom line quickly. The price / earnings / growth ratio (PEG) is a good way to incorporate growth rates into the valuation process. The overall PEG for the S&P 500 is around 0.9. Again, without positive earnings, Plug does not have a positive PEG ratio to use as a valuation gauge.
The price-to-sales ratio is another important valuation metric, especially for unprofitable companies and growth stocks. The S&P 500’s PS ratio is 3.15, well above its long-term average of 1.62. Plug’s PS ratio is 34.8, more than 10 times the S&P 500 average. Plug’s PS ratio is also up 1.100% over the past five years, suggesting that the stock price is at the upper end of its historical valuation range.
Finally, Wall Street analysts see little value in Plug stock over next 12 months. The average analyst price target among the 24 analysts covering Plug is $ 42, suggesting a rise of about 4.1% from current levels.
The verdict: At today’s price, Plug stock appears to be extremely overvalued based on a sample of common fundamental valuation metrics.
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