Is It Time To Consider Buying DEUTZ Aktiengesellschaft (ETR:DEZ)?

DEUTZ Aktiengesellschaft (ETR:DEZ), is not the largest company out there, but it saw significant share price movement during recent months on the XTRA, rising to highs of €7.00 and falling to the lows of €4.51. 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 DEUTZ's current trading price of €4.53 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 DEUTZ’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for DEUTZ

What is DEUTZ 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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.34x is currently trading slightly below its industry peers’ ratio of 17.62x, which means if you buy DEUTZ today, you’d be paying a reasonable price for it. And if you believe that DEUTZ should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since DEUTZ’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 kind of growth will DEUTZ generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. DEUTZ's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? DEZ’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 DEZ? 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 DEZ, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for DEZ, 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 while earnings quality is important, it's equally important to consider the risks facing DEUTZ at this point in time. In terms of investment risks, we've identified 2 warning signs with DEUTZ, and understanding them should be part of your investment process.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.