Why KION GROUP AG (ETR:KGX) Could Be Worth Watching

By
Simply Wall St
Published
July 18, 2021
XTRA:KGX
Source: Shutterstock

KION GROUP AG (ETR:KGX) received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €92.98 at one point, and dropping to the lows of €80.98. 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 KION GROUP's current trading price of €88.00 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at KION GROUP’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 KION GROUP

What is KION GROUP worth?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that KION GROUP’s ratio of 37.94x is trading slightly below its industry peers’ ratio of 40.54x, which means if you buy KION GROUP today, you’d be paying a reasonable price for it. And if you believe KION GROUP should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that KION GROUP’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.

Can we expect growth from KION GROUP?

earnings-and-revenue-growth
XTRA:KGX Earnings and Revenue Growth July 19th 2021

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. With profit expected to more than double over the next couple of years, the future seems bright for KION GROUP. 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? KGX’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 financial strength of the company. Have these factors changed since the last time you looked at KGX? 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 KGX, 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 KGX, 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.

If you'd like to know more about KION GROUP as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for KION GROUP you should know about.

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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. 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.
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