Should You Think About Buying Erlebnis Akademie AG (FRA:EAD) Now?

Erlebnis Akademie AG (FRA:EAD), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the DB over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Erlebnis Akademie’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Erlebnis Akademie

What is Erlebnis Akademie worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Erlebnis Akademie’s ratio of 23.95x is trading in-line with its industry peers’ ratio, which means if you buy Erlebnis Akademie today, you’d be paying a relatively reasonable price for it. So, is there another chance to buy low in the future? Given that Erlebnis Akademie’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.

What does the future of Erlebnis Akademie look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Erlebnis Akademie's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 EAD’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 EAD? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on EAD, 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 EAD, 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 want to dive deeper into Erlebnis Akademie, you'd also look into what risks it is currently facing. For example - Erlebnis Akademie has 2 warning signs we think you should be aware of.

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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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