Today we’re going to take a look at the well-established Infineon Technologies AG (ETR:IFX). The company’s stock saw significant share price movement during recent months on the XTRA, rising to highs of €18.54 and falling to the lows of €14.88. 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 Infineon Technologies’s current trading price of €16.29 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Infineon Technologies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Infineon Technologies worth?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Infineon Technologies’s ratio of 18.01x is trading slightly below its industry peers’ ratio of 20.61x, which means if you buy Infineon Technologies today, you’d be paying a fair price for it. And if you believe that Infineon Technologies should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Infineon Technologies’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Infineon Technologies look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Infineon Technologies’s earnings over the next few years are expected to increase by 61%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in IFX’s positive outlook, 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 IFX? 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 IFX, 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 IFX, which means it’s worth further examining 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 Infineon Technologies. You can find everything you need to know about Infineon Technologies in the latest infographic research report. If you are no longer interested in Infineon Technologies, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.