Is Now The Time To Look At Buying Fresenius Medical Care AG & Co. KGaA (ETR:FME)?

Fresenius Medical Care AG & Co. KGaA (ETR:FME) saw a decent share price growth in the teens level on the XTRA over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Fresenius Medical Care KGaA’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Fresenius Medical Care KGaA

What Is Fresenius Medical Care KGaA 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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 21.96x is currently trading slightly above its industry peers’ ratio of 21.37x, which means if you buy Fresenius Medical Care KGaA today, you’d be paying a relatively sensible price for it. And if you believe Fresenius Medical Care KGaA should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Fresenius Medical Care KGaA’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Fresenius Medical Care KGaA?

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. With profit expected to grow by 97% over the next couple of years, the future seems bright for Fresenius Medical Care KGaA. 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? It seems like the market has already priced in FME’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 FME? 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 an eye on FME, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for FME, 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'd like to know more about Fresenius Medical Care KGaA as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Fresenius Medical Care KGaA, and understanding these should be part of your investment process.

If you are no longer interested in Fresenius Medical Care KGaA, 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.