At €34.09, Is Fresenius SE & Co. KGaA (ETR:FRE) Worth Looking At Closely?

By
Simply Wall St
Published
April 17, 2022
XTRA:FRE
Source: Shutterstock

Let's talk about the popular Fresenius SE & Co. KGaA (ETR:FRE). The company's shares led the XTRA gainers with a relatively large price hike in the past couple of weeks. 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. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Fresenius SE KGaA’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Fresenius SE KGaA

Is Fresenius SE KGaA still cheap?

Great news for investors – Fresenius SE KGaA is still trading at a fairly cheap price 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 10.47x is currently well-below the industry average of 21.31x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Fresenius SE KGaA’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Fresenius SE KGaA generate?

earnings-and-revenue-growth
XTRA:FRE Earnings and Revenue Growth April 17th 2022

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. 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. Fresenius SE KGaA's earnings over the next few years are expected to increase by 32%, 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? Since FRE is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on FRE for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FRE. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Fresenius SE KGaA at this point in time. Every company has risks, and we've spotted 1 warning sign for Fresenius SE KGaA you should know about.

If you are no longer interested in Fresenius SE 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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