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Overpriced: Acuity Brands (NYSE:AYI)


We look at Acuity Brands, Inc. (NYSE:AYI) a company in the Technology industry getting a lot of attention at the moment, to assess if it provides value for investors considering buying or selling it. Currently Acuity Brands, Inc. is trading at $168.17 after moving up 1.40% in the previous day of trading.

AYI is trading with a trailing 12 month P/E multiple of 40.23 and an estimated forward P/E multiple of 25.46. The stock has an estimated 5 year annual growth of 14.74% and a PEG multiple of 2.73.

Rather than the usual Price to Earnings (P/E) multiple method, we use a slightly different method to assess if Acuity Brands, Inc. is potentially a value buy for investors, the PEG ratio (P/E to growth). This PEG multiple takes into account the expected long term growth in earnings of the company rather than merely the growth for one earnings period ahead as forward P/E does.

That is to say, P/E simply doesn’t account for the long term prospects of AYI. As a rule of thumb, a stock with a PEG of between 0 and 1 is usually 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 AYI being 2.73, we consider Acuity Brands, Inc. to likely be overpriced.

This analysis means that value buyers who do not currently hold Acuity Brands, Inc. (NYSE:AYI) should not consider buying and investors currently holding the stock should consider selling.

The mean analyst 12 month target price for Acuity Brands, Inc. (NYSE:AYI) is currently $173.42 or 3.12% above the current price. Additionally, the stock has been as high as $168.61 and as low as $104.69 in the last 52 weeks. Analysts are estimating that AYI will report earnings per share of $1.34 next quarter.