Is It Time To Consider Buying Covestro AG (ETR:1COV)?

Covestro AG (ETR:1COV) saw significant share price movement during recent months on the XTRA, rising to highs of €58.80 and falling to the lows of €51.78. 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 Covestro's current trading price of €54.20 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 Covestro’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Covestro

What's the opportunity in Covestro?

Good news, investors! Covestro is still a bargain right now. My valuation model shows that the intrinsic value for the stock is €83.57, but it is currently trading at €54.20 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Covestro’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Covestro?

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 grow by 30% over the next couple of years, the future seems bright for Covestro. 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? Since 1COV is currently undervalued, it may be a great time to accumulate more of 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 financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on 1COV for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 1COV. 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.

If you want to dive deeper into Covestro, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for Covestro (1 is a bit concerning) you should be familiar with.

If you are no longer interested in Covestro, 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. 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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