Yahoo Finance Why ElringKlinger AG (FRA:ZIL2) Could Be Worth Watching
ElringKlinger AG (FRA:ZIL2), which is in the auto components business, and is based in Germany, received a lot of attention from a substantial price movement on the DB over the last few months, increasing to €13.98 at one point, and dropping to the lows of €10.05. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether ElringKlinger’s current trading price of €10.21 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.
Check out our latest analysis for ElringKlinger
What is ElringKlinger worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that ElringKlinger’s ratio of 10.7x is trading slightly below its industry peers’ ratio of 14.01x, which means if you buy ElringKlinger today, you’d be paying a reasonable price for it. And if you believe that ElringKlinger should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because ElringKlinger’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will ElringKlinger generate?
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 36.3% 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? ZIL2’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. 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 its fair value?
Are you a potential investor? If you’ve been keeping an eye on ZIL2, now may not be the most optimal time to buy, given it is trading around its fair value. 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on ElringKlinger. You can find everything you need to know about ElringKlinger in the latest infographic research report. If you are no longer interested in ElringKlinger, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
