ElringKlinger AG (ETR:ZIL2), is not the largest company out there, but it saw significant share price movement during recent months on the XTRA, rising to highs of €7.20 and falling to the lows of €5.20. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether ElringKlinger’s current trading price of €5.28 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ElringKlinger’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for ElringKlinger
Is ElringKlinger Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company’s price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.27x is currently trading slightly below its industry peers’ ratio of 9.06x, which means if you buy ElringKlinger today, you’d be paying a decent price for it. And if you believe ElringKlinger should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that ElringKlinger’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from ElringKlinger?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 37% over the next couple of years, the future seems bright for ElringKlinger. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in ZIL2’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ZIL2? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on ZIL2, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for ZIL2, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it’s worth noting the risks involved. Case in point: We’ve spotted 1 warning sign for ElringKlinger you should be aware of.
If you are no longer interested in ElringKlinger, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com