Is Continental Aktiengesellschaft (ETR:CON) Potentially Undervalued?

By
Simply Wall St
Published
December 17, 2021
XTRA:CON
Source: Shutterstock

Continental Aktiengesellschaft (ETR:CON) saw significant share price movement during recent months on the XTRA, rising to highs of €113 and falling to the lows of €90.50. 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 Continental's current trading price of €92.67 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 Continental’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 Continental

What is Continental worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Continental’s ratio of 19.28x is trading slightly above its industry peers’ ratio of 17.13x, which means if you buy Continental today, you’d be paying a relatively reasonable price for it. And if you believe Continental should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Continental’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Continental look like?

earnings-and-revenue-growth
XTRA:CON Earnings and Revenue Growth December 17th 2021

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. With profit expected to more than double over the next couple of years, the future seems bright for Continental. 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 already priced in CON’s positive outlook, with shares trading around industry price multiples. 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 CON? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on CON, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CON, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Continental has 1 warning sign we think you should be aware of.

If you are no longer interested in Continental, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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