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Continental (XTRA:CON) has been drawing attention lately as investors look at its mixed scorecard, with annual revenue of €39.54b alongside a net loss of €238m and a value score of 4.
See our latest analysis for Continental.
At a share price of €66.10, Continental’s recent trading has been choppy, with a 1 day share price return of 2.61% but a year to date share price return showing a 3.64% decline. Its 1 year total shareholder return of 32.61% and 3 year total shareholder return of 48.18% point to momentum that has built over a longer horizon.
If you are looking beyond Continental and want to stay close to the auto theme, it could be worth scanning other auto manufacturers that might fit your watchlist next.
With Continental trading at €66.10, sitting at a reported 40% intrinsic discount yet still posting a €238m loss, you have to ask yourself: is this a genuine mispricing, or is the market already factoring in any future recovery?
On a P/S of 0.3x at a €66.10 share price, Continental looks inexpensive compared with peers, yet some valuation checks flag a more complicated picture.
The P/S multiple compares the company’s market value with its annual revenue, which can be useful when earnings are weak or loss making, as is the case here. For an auto components group with €39.54b in revenue and a current net loss, focusing on sales rather than earnings gives you a cleaner, less cyclical reference point.
According to the checks provided, Continental trades at a 39.6% discount to an internal fair value estimate and also screens as good value on P/S versus the peer average of 0.7x and in line with the European auto components industry at 0.3x. However, that same framework suggests the current 0.3x P/S sits above an estimated fair P/S of 0.2x. This implies the valuation could shift if the market moves closer to that lower fair ratio.
Set against industry, Continental’s 0.3x P/S is substantially lower than the peer average 0.7x, yet above its own estimated fair ratio of 0.2x. This creates a tension that leaves the stock looking cheap compared with competitors but richer than the level its fair ratio model points to.
Explore the SWS fair ratio for Continental
Result: Price-to-Sales of 0.3x (UNDERVALUED)
However, you still have to weigh the current €238m net loss and the 19.15% annual revenue decline, which could signal deeper operational or demand related pressures.
While the 0.3x P/S ratio hints at value, our DCF model indicates a stronger case, with Continental at €66.10 compared with an estimated future cash flow value of €109.40. On this view, the shares appear materially undervalued, which raises a simple question: is the market too cautious on cash flows?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Continental for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 878 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
If you are unconvinced by these checks or simply prefer to rely on your own process, you can review the same numbers yourself and build a custom view of Continental’s story in just a few minutes, then Do it your way.
A great starting point for your Continental research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.
Before you move on, take a moment to widen your opportunity set with a few focused screens that can surface stocks you might otherwise overlook.
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.
Companies discussed in this article include CON.DE.
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