While Medios AG (ETR:ILM1) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €40.50 at one point, and dropping to the lows of €29.60. 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 Medios' current trading price of €29.60 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 Medios’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 Medios
What is Medios worth?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Medios’s ratio of 51.33x is above its peer average of 19.33x, which suggests the stock is trading at a higher price compared to the Healthcare industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Medios’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Medios generate?
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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Medios. 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 well and truly priced in ILM1’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ILM1 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on ILM1 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ILM1, which means it’s worth diving deeper into other factors 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 Medios at this point in time. In terms of investment risks, we've identified 2 warning signs with Medios, and understanding these should be part of your investment process.
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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.
About XTRA:ILM1
Reasonable growth potential with adequate balance sheet.
