Is BELIMO Holding AG (VTX:BEAN) Potentially Undervalued?

While BELIMO Holding AG (VTX:BEAN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SWX over the last few months. With many analysts covering the mid-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 BELIMO Holding’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for BELIMO Holding

What's the opportunity in BELIMO Holding?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 BELIMO Holding’s ratio of 62.05x is above its peer average of 36.08x, which suggests the stock is trading at a higher price compared to the Building industry. Furthermore, BELIMO Holding’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of BELIMO Holding 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 47% over the next couple of years, the future seems bright for BELIMO Holding. 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 well and truly priced in BEAN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe BEAN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on BEAN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for BEAN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing BELIMO Holding at this point in time. Every company has risks, and we've spotted 1 warning sign for BELIMO Holding you should know about.

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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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