Should You Think About Buying Mercedes-Benz Group AG (ETR:MBG) Now?

Today we're going to take a look at the well-established Mercedes-Benz Group AG (ETR:MBG). The company's stock saw significant share price movement during recent months on the XTRA, rising to highs of €73.56 and falling to the lows of €55.43. 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 Mercedes-Benz Group's current trading price of €57.52 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 Mercedes-Benz Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Mercedes-Benz Group

What's The Opportunity In Mercedes-Benz Group?

According to my 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. 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 Mercedes-Benz Group’s ratio of 4x is trading in-line with its industry peers’ ratio, which means if you buy Mercedes-Benz Group today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Mercedes-Benz Group’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.

What does the future of Mercedes-Benz Group 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. Though in the case of Mercedes-Benz Group, it is expected to deliver a negative earnings growth of -16%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, MBG appears to be trading around industry price multiples, 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 optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on MBG, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on MBG for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 crystallize your views on MBG should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 3 warning signs for Mercedes-Benz Group (2 are significant!) that we believe deserve your full attention.

If you are no longer interested in Mercedes-Benz Group, 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.