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

Let's talk about the popular Fresenius Medical Care AG (ETR:FME). The company's shares received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €48.08 at one point, and dropping to the lows of €40.01. 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 Fresenius Medical Care's current trading price of €43.90 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fresenius Medical Care’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 Fresenius Medical Care

What's The Opportunity In Fresenius Medical Care?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’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 19.55x is currently trading slightly below its industry peers’ ratio of 21.04x, which means if you buy Fresenius Medical Care today, you’d be paying a reasonable price for it. And if you believe that Fresenius Medical Care 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. Furthermore, it seems like Fresenius Medical Care’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Fresenius Medical Care?

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 96% over the next couple of years, the future seems bright for Fresenius Medical Care. 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 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 FME, 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 FME, 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.

So while earnings quality is important, it's equally important to consider the risks facing Fresenius Medical Care at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Fresenius Medical Care.

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