Grenke AG (XTRA:GLJ), a €4.47B mid-cap, operates in the financial services industry, which tends to draw the more conservative investors who attracted by their steady revenue and the above-average dividend yields. Financial services analysts are forecasting for the entire industry, a fairly unexciting growth rate of 9.55% in the upcoming year , and a massive growth of 32.58% over the next couple of years. However this rate still came in below the growth rate of the DE stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether Grenke is a laggard or leader relative to its financial sector peers. See our latest analysis for Grenke
What’s the catalyst for Grenke’s sector growth?
Recently, government and overseas regulators involvement has increased to play a prominent role, closely examining and controlling day-to-day business administration of certain companies. In the past year, the industry delivered growth in the teens, beating the DE market growth of 14.26%. Grenke leads the pack with its impressive earnings growth of 20.95% over the past year. However, analysts are expecting its future earnings growth to be more in-line with the industry average, hovering at 7.60% over the next couple of years.
Is Grenke and the sector relatively cheap?
The financial services industry is trading at a PE ratio of 12.63x, below the broader DE stock market PE of 18.41x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 10.77% on equities compared to the market’s 11.43%. On the stock-level, Grenke is trading at a higher PE ratio of 35.59x, making it more expensive than the average diversified financial services stock. In terms of returns, Grenke generated 15.81% in the past year, which is 5.04% over the diversified financial services sector.
Grenke’s future growth prospect aligns with that of the broader market, however its relative value seems to be above the rest of the industry. This could indicate the price is reflective of factors other than growth. If Grenke has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other financial companies. If you’re looking for growth, it seems other industry peers are also delivering the same rate. However, before you make a decision on the stock, I suggest you look at Grenke’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has GLJ’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Grenke? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.