Is It Time To Consider Buying Stabilus SE (ETR:STM)?

While Stabilus SE (ETR:STM) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €58.20 at one point, and dropping to the lows of €40.45. 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 Stabilus' current trading price of €40.45 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Stabilus’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 Stabilus

Is Stabilus Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Stabilus’s ratio of 13.15x is trading slightly below its industry peers’ ratio of 15.16x, which means if you buy Stabilus today, you’d be paying a decent price for it. And if you believe that Stabilus should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Stabilus’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 company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Stabilus 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. 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. Stabilus' earnings over the next few years are expected to increase by 50%, 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 STM’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 track record of its management team. Have these factors changed since the last time you looked at STM? 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 tabs on STM, 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 STM, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Stabilus, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with Stabilus (including 1 which is a bit unpleasant).

If you are no longer interested in Stabilus, 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.