Pfeiffer Vacuum Technology AG (ETR:PFV), might not be a large cap stock, but it led the XTRA gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Pfeiffer Vacuum Technology’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in Pfeiffer Vacuum Technology?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Pfeiffer Vacuum Technology’s ratio of 48.42x is above its peer average of 36.42x, which suggests the stock is trading at a higher price compared to the Machinery industry. In addition to this, it seems like Pfeiffer Vacuum Technology’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Pfeiffer Vacuum Technology?
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. With profit expected to grow by 57% over the next couple of years, the future seems bright for Pfeiffer Vacuum Technology. 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? PFV’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe PFV should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on PFV for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for PFV, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
It can be quite valuable to consider what analysts expect for Pfeiffer Vacuum Technology from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.
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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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