Investors in HSBC (LSE: HSBA) (NYSE: HSBC.US) have experienced a disappointing year, with shares in the bank falling by 12% over the last 12 months. The poor performance of the stock is put into context when compared to the gains posted by the FTSE 100, which is up over 3% during the same time period.
However, does a period of underperformance now suggest that HSBC could be good value? Can it really be considered a super growth stock?
Strong Growth Prospects
Despite the banking sector having a very challenging period over the last five years, HSBC has been able to deliver profits in each of the five years. However, profits have been volatile and have not shown a particularly strong growth pattern; tending to operate in a range rather than having an upward trajectory.
However, the next two years are forecast to deliver strong growth for HSBC, with earnings per share (EPS) expected to increase by over 13% in 2014 and by 10% in 2015. This is considerably higher than the FTSE 100 average of mid-single digit growth and shows that HSBC is a relatively strong growth stock with impressive prospects.
Good Value
As mentioned, shares have had a tough time over the last year. This, though, means that they are better value now than they were one year ago. Indeed, HSBC currently trades on a price to earnings (P/E) ratio of 10.6, which is considerably below the FTSE 100 P/E of around 13.5. This shows that shares in HSBC are not just good value on a standalone basis, but on a relative basis, too.
Furthermore, combining the P/E ratio and HSBC’s EPS forecast growth rate highlights that the bank offers growth at a reasonable price. The price to earnings growth (PEG) ratio of 0.9 is very attractive and emphasises the attraction of shares at current price levels.
Looking Ahead
With the macroeconomic outlook continuing to improve, HSBC looks well placed to benefit from further improvements both in the developed world and in emerging markets, where the bank continues to have considerable exposure. With strong growth forecasts over the next two years and an attractive valuation, HSBC appears to be a strong growth play and should be considered a super growth stock.
