Is There Now An Opportunity In Knorr-Bremse Aktiengesellschaft (ETR:KBX)?

Knorr-Bremse Aktiengesellschaft (ETR:KBX), might not be a large cap stock, but it saw significant share price movement during recent months on the XTRA, rising to highs of €66.18 and falling to the lows of €47.04. 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 Knorr-Bremse's current trading price of €47.04 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 Knorr-Bremse’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 Knorr-Bremse

What's The Opportunity In Knorr-Bremse?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 14.66x is currently trading slightly above its industry peers’ ratio of 14.61x, which means if you buy Knorr-Bremse today, you’d be paying a relatively sensible price for it. And if you believe that Knorr-Bremse should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Knorr-Bremse’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Knorr-Bremse look like?

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. Knorr-Bremse's earnings over the next few years are expected to increase by 39%, 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 KBX’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at KBX? 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 KBX, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for KBX, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 1 warning sign for Knorr-Bremse you should be aware of.

If you are no longer interested in Knorr-Bremse, 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.