Today we’re going to take a look at the well-established Amadeus IT Group, S.A. (BME:AMS). The company’s stock saw a significant share price rise of over 20% in the past couple of months on the BME. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Amadeus IT Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Amadeus IT Group worth?
Amadeus IT Group appears to be overvalued by 39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €47.56 on the market compared to my intrinsic value of €34.10. This means that the opportunity to buy Amadeus IT Group at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Amadeus IT Group’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Amadeus IT Group?
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. However, with a relatively muted profit growth of 6.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Amadeus IT Group, at least in the short term.
What this means for you:
Are you a shareholder? AMS’s future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AMS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on AMS for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Amadeus IT Group, you’d also look into what risks it is currently facing. Case in point: We’ve spotted 3 warning signs for Amadeus IT Group you should be aware of.
If you are no longer interested in Amadeus IT Group, 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. 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.
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