Is Now The Time To Look At Buying Geberit AG (VTX:GEBN)?

Let's talk about the popular Geberit AG (VTX:GEBN). The company's shares had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of CHF514 to CHF563. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Geberit’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 Geberit

What Is Geberit Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 29.6x is currently trading slightly above its industry peers’ ratio of 26.54x, which means if you buy Geberit today, you’d be paying a relatively reasonable price for it. And if you believe that Geberit should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Geberit’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Geberit?

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 a double-digit 18% over the next couple of years, the outlook is positive for Geberit. 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? GEBN’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at GEBN? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on GEBN, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for GEBN, 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.

So while earnings quality is important, it's equally important to consider the risks facing Geberit at this point in time. Case in point: We've spotted 1 warning sign for Geberit you should be aware of.

If you are no longer interested in Geberit, 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. 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.