Overvalued Stocks of Services Sector with Market Volume Over 2 Million – AMZN, DISH, SPLS, URI, NFLX

  on Nov 22,2012 Posted in Finance ,Investment Ideas
 
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The Price/Earnings to Growth ratio or PEG ratio shows the relationship between security price, EPS and the anticipated growth rate by corporation.

The PEG ratio comprises of the PE ratio divided by the firm’s growth rate. Using just the Price to earnings ratio makes high-growth corporations look overvalued relative to others.

This ratio permits investors to accurately evaluate firms with different PE ratios and growth rates.

A corporation with a PEG ratio lower than 1 is looked undervalued while a company with a PEG ratio over 1 is considered overvalued. On the other hand, a company with a PEG ratio almost 1 is considered fairly valued.

In this article we will discuss top five overvalued stocks in services sector with market volume over two million. Earlier we discussed price to book ratio for blue chip components.

Amazon.com, Inc (NASDAQ:AMZN) has the market capitalization of 107.82 billion while its P/E ratio of 3181.37. Institutional ownership of the company was 68%. Price to earning to growth ratio of company was 99.63, which is too high as compared to this sector and stock is considered as overvalued. The company net profit margin was 0.28% while its gross profit margin was 23.74%.

DISH Network Corp (NASDAQ:DISH) is the second stock with higher PEG ratio in utilities sector and market volume over 2 million. PEG ratio of DISH Network was 96.67 lower than Amazon. The institutional ownership of the company was 41% while its price to earnings ratio was 21.30. Shares of the company were moving ahead of SMA 50 with 4.42% while lagging behind SMA 20 with -0.98%.

Another stock from the same group was Staples, Inc (NASDAQ:SPLS), the company has market capitalization of 7.95 billion while its price to earnings ratio was 471.25. The company offered earning per share of 0.03 while its 673.88 million shares were outstanding. The PEG ratio of SPLS was 44.19 while its ROE ratio was 0.49%. In liquidity analysis, current ratio was 1.62 while debt to equity ratio was 0.27.

United Rentals, Inc (NYSE:URI) offered EPS of 0.69 while the company has market capitalization of 3.80 billion and its institutional ownership was 114%. URI has PEG ratio of 4.95 while price to sale ratio was 1.06. The company earned $63 million in previous 12 months on $3.61 billion of sales.

Netflix, Inc (NASDAQ:NFLX) has market capitalization of 4.61 billion while its P/E ratio was 105.05. The stock has the institutional ownership of 90% and the PEG ratio of the stock was 4.52. Beta factor, which measure the risk associated with the security, was 0.58. Net profit margin of company was 1.26% while its gross profit margin was 29.23%.

In the conclusion we can say that these five stocks have higher PEG ratio among all services sector with market capitalization over 2 million. So if we consider only price earnings to growth ratio these five stocks are overvalued.

Disclosure: The views and opinions expressed in this article are exclusively those of the authors who have no stake in any stocks mentioned, and hold no plan to acquire any stake within the next 5 days.

 

 

 

 

 



 

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