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Growth Buy: Depomed (NASDAQ:DEPO)
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We perform a growth and value analysis on the fundamentals of Depomed, Inc. (NASDAQ:DEPO) [Trend Analysis] and determine that although the stock looks over priced when looking at the forward earnings one period ahead, from a growth perspective into the future the stock is underpriced and could certainly be a good investment for longer term focused buyers.
Depomed, Inc. (NASDAQ:DEPO) last traded at $23.06 after moving up 5.06% for the trading day.
DEPO is trading with a trailing 12 month P/E multiple of 12.46 and an estimated forward P/E multiple of 25.71. The stock has an estimated 5 year annual growth of 29.67% and a PEG multiple of 0.42.
From a value investor perspective, as mentioned Depomed, Inc. trades on an estimated forward P/E multiple of 25.71. The current estimated forward P/E ratio for the market as a whole is approximately 19.00. Therefore, for value investors DEPO appears to be overpriced.
For growth investors, who are more interested in growth into the longer term for the stock, we look at the PEG multiple (P/E to growth) of Depomed, Inc. (NASDAQ:DEPO). This PEG multiple takes into account the expected long term growth in earnings of Depomed, Inc. rather than merely the growth for one full earnings period ahead.
As a rule of thumb, growth investors often believe a stock with a PEG of between 0 and 1 is considered to be underpriced, between 1 and 2 to be at fair value and over 2 to be overpriced. Based on the PEG ratio of DEPO being 0.42, we consider Depomed, Inc. to likely be underpriced.
The mean analyst 12 month target price for Depomed, Inc. (NASDAQ:DEPO) is currently $23.40 or 1.47% above the current price. Additionally, the stock has been as high as $23.20 and as low as $9.85 in the last 52 weeks. Analysts are estimating that DEPO will report earnings per share of $0.06 next quarter.