Is GEA Group Aktiengesellschaft (ETR:G1A) Potentially Undervalued?

GEA Group Aktiengesellschaft (ETR:G1A), is not the largest company out there, but it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €40.46 at one point, and dropping to the lows of €34.85. 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 GEA Group's current trading price of €36.05 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at GEA Group’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 GEA Group

What's The Opportunity In GEA Group?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.0% below my intrinsic value, which means if you buy GEA Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth €38.75, then there’s not much of an upside to gain from mispricing. What's more, GEA Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will GEA Group 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. 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. Though in the case of GEA Group, it is expected to deliver a relatively unexciting earnings growth of 4.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? G1A’s future growth appears to have been factored into the current share price, 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 G1A, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with GEA Group, and understanding it should be part of your investment process.

If you are no longer interested in GEA 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.