uploads/2019/05/eps-cagr-1.png

These High-Growth Tech Stocks Could Be Undervalued

By

Updated

ServiceNow

Tech stocks have created massive wealth over the years and have been Wall Street favorites for a while now. Let’s look at the high-growth tech stocks discussed in this series and their valuations at their current prices. High-growth stocks have high valuation ratios and need to grow their sales and earnings at comparable rates.

We can find out which of these stocks are undervalued and which are overvalued by using the PE multiple. ServiceNow (NOW) has a forward PE multiple of 62.74x. ServiceNow’s EPS are expected to fall 28% this year, indicating that its stock would be overvalued even if it fell 50%.

Ready to put your morning scrolling to use? Sign up for Bagels & Stox, our witty take on the top market and investment news straight to your inbox! Whether you’re a serious investor or just want to be informed, Bagels & Stox will be your favorite email.

ServiceNow stock has risen by a staggering 455% in the last five years. Its EPS have risen at a CAGR (compound annual growth rate) of 120% in the same period. Analysts expect the company’s earnings to rise 32.3% in the next five years.

Article continues below advertisement

Arista Networks

Arista Networks (ANET) has a forward PE multiple of 29.70x for 2019. In comparison, ANET’s EPS are expected to rise 16.3% this year, indicating that the stock is overvalued at its current price.

ANET stock has risen by an impressive 406% over the last five years. Its EPS have risen at a CAGR of 51% in the last five years. Analysts expect the company’s earnings to rise 18.5% in the next five years.

Square

Square (SQ) has a forward PE multiple of 62.29x. In comparison, Square’s EPS are expected to rise 59.6% this year, indicating that the stock is marginally overvalued at its current price.

Square stock has risen by a mind-boggling 429% since November 2015. Its EPS rose 73% in 2017 and 67% in 2018. Analysts expect the company’s earnings to rise 47% in the next five years.

Article continues below advertisement

Splunk

Splunk (SPLK) has a forward PE multiple of 60.10x. In comparison, its EPS are expected to rise 26.3% this fiscal year, indicating that it, too, is overvalued at its current price.

Splunk stock has risen an impressive 172% over the last five years. Its EPS have risen at a CAGR of 86% in the last five years. Analysts expect the company’s earnings to rise 33.0% in the next five years.

iRobot

iRobot (IRBT) has a forward PE multiple of 32.32x. In comparison, iRobot’s EPS are expected to rise 19.4% this year, indicating that the stock is overvalued at its current price.

iRobot stock has risen by an impressive 210% over the last five years. Its EPS have risen at a CAGR of 31% in the last five years. Analysts expect the company’s earnings to rise 18% in the next five years.

Advertisement

More From Market Realist