Is Now The Time To Look At Buying Varta AG (ETR:VAR1)?

Varta AG (ETR:VAR1), is not the largest company out there, but it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €83.10 at one point, and dropping to the lows of €29.23. 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 Varta's current trading price of €29.54 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 Varta’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Our analysis indicates that VAR1 is potentially undervalued!

What Is Varta Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.2% below my intrinsic value, which means if you buy Varta today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €29.90, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Varta’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.

Can we expect growth from Varta?

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. However, with a negative profit growth of -13% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Varta. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? VAR1 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on VAR1 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on VAR1 should the price fluctuate below its true value.

If you want to dive deeper into Varta, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 3 warning signs with Varta, and understanding them should be part of your investment process.

If you are no longer interested in Varta, 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.