What Does Bayerische Motoren Werke Aktiengesellschaft's (ETR:BMW) Share Price Indicate?

Today we're going to take a look at the well-established Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW). The company's stock received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €111 at one point, and dropping to the lows of €93.31. 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 Bayerische Motoren Werke's current trading price of €93.31 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 Bayerische Motoren Werke’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Bayerische Motoren Werke

What's The Opportunity In Bayerische Motoren Werke?

According to my valuation model, Bayerische Motoren Werke seems to be fairly priced at around 9.4% below my intrinsic value, which means if you buy Bayerische Motoren Werke today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €103.03, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Bayerische Motoren Werke’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.

Can we expect growth from Bayerische Motoren Werke?

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. However, with a negative profit growth of -1.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Bayerische Motoren Werke. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? BMW seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on BMW for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on BMW should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Bayerische Motoren Werke at this point in time. Every company has risks, and we've spotted 4 warning signs for Bayerische Motoren Werke (of which 1 is potentially serious!) you should know about.

If you are no longer interested in Bayerische Motoren Werke, 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.