Is Now The Time To Look At Buying LANXESS Aktiengesellschaft (ETR:LXS)?

While LANXESS Aktiengesellschaft (ETR:LXS) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the XTRA over the last few months. With many analysts covering the mid-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? Let’s examine LANXESS’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for LANXESS

Is LANXESS still cheap?

The stock is currently trading at €62.66 on the share market, which means it is overvalued by 26% compared to my intrinsic value of €49.57. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that LANXESS’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 does the future of LANXESS look like?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for LANXESS, at least in the near future.

What this means for you:

Are you a shareholder? If you believe LXS is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. 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 an eye on LXS for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 5 warning signs for LANXESS (1 is a bit concerning) you should be familiar with.

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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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