Is Now The Time To Look At Buying SAF-Holland S.A. (FRA:SFQ)?

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SAF-Holland S.A. (FRA:SFQ), which is in the auto components business, and is based in Luxembourg, received a lot of attention from a substantial price movement on the DB over the last few months, increasing to €11.55 at one point, and dropping to the lows of €9.28. 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 SAF-Holland’s current trading price of €10.11 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at SAF-Holland’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 SAF-Holland

What’s the opportunity in SAF-Holland?

According to my valuation model, SAF-Holland seems to be fairly priced at around 8.82% above my intrinsic value, which means if you buy SAF-Holland today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is €9.29, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that SAF-Holland’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 does the future of SAF-Holland look like?

DB:SFQ Past and Future Earnings, July 4th 2019
DB:SFQ Past and Future Earnings, July 4th 2019

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. SAF-Holland’s earnings over the next few years are expected to increase by 43%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in SFQ’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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on SFQ, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on SAF-Holland. You can find everything you need to know about SAF-Holland in the latest infographic research report. If you are no longer interested in SAF-Holland, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.