Stock Analysis

Is JOST Werke AG (ETR:JST) Potentially Undervalued?

XTRA:JST
Source: Shutterstock

While JOST Werke AG (ETR:JST) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the XTRA, rising to highs of ā‚¬43.00 and falling to the lows of ā‚¬34.50. 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 JOST Werke's current trading price of ā‚¬36.75 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Letā€™s take a look at JOST Werkeā€™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 JOST Werke

What's the opportunity in JOST Werke?

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. Iā€™ve used the price-to-earnings ratio in this instance because thereā€™s not enough visibility to forecast its cash flows. The stockā€™s ratio of 11.8x is currently trading slightly below its industry peersā€™ ratio of 15.37x, which means if you buy JOST Werke today, youā€™d be paying a decent price for it. And if you believe JOST Werke should be trading in this range, then there isnā€™t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because JOST Werkeā€™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 companyā€™s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of JOST Werke look like?

earnings-and-revenue-growth
XTRA:JST Earnings and Revenue Growth June 24th 2022

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 itā€™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 28% over the next couple of years, the future seems bright for JOST Werke. 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 JSTā€™s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we havenā€™t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at JST? 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 youā€™ve been keeping tabs on JST, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for JST, which means itā€™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. Case in point: We've spotted 3 warning signs for JOST Werke you should be mindful of and 1 of these is concerning.

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

New: Manage All Your Stock Portfolios in One Place

We've created the ultimate portfolio companion for stock investors, and it's free.

ā€¢ Connect an unlimited number of Portfolios and see your total in one currency
ā€¢ Be alerted to new Warning Signs or Risks via email or mobile
ā€¢ Track the Fair Value of your stocks

Try a Demo Portfolio for Free

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.