Is Now The Time To Look At Buying paragon GmbH & Co. KGaA (ETR:PGN)?

paragon GmbH & Co. KGaA (ETR:PGN), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the XTRA. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine paragon GmbH KGaA’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for paragon GmbH KGaA

What's The Opportunity In paragon GmbH KGaA?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18% below my intrinsic value, which means if you buy paragon GmbH KGaA today, you’d be paying a fair price for it. And if you believe that the stock is really worth €6.85, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that paragon GmbH KGaA’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will paragon GmbH KGaA generate?

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 84% over the next year, the near-term future seems bright for paragon GmbH KGaA. 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 PGN’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on PGN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 3 warning signs for paragon GmbH KGaA (1 doesn't sit too well with us!) and we strongly recommend you look at these before investing.

If you are no longer interested in paragon GmbH KGaA, 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.