Is It Time To Consider Buying Uzin Utz AG (ETR:UZU)?

Uzin Utz AG (ETR:UZU), might not be a large cap stock, but it led the XTRA gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Uzin Utz’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Uzin Utz

Is Uzin Utz still cheap?

According to my 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. 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 Uzin Utz’s ratio of 20.9x is trading slightly above its industry peers’ ratio of 20.68x, which means if you buy Uzin Utz today, you’d be paying a relatively sensible price for it. And if you believe that Uzin Utz should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Uzin Utz’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Uzin Utz?

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 revenues expected to grow by a double-digit 27% over the next couple of years, the outlook is positive for Uzin Utz. If the level of expenses is able to be maintained, 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? UZU’s optimistic future growth appears to have been factored into the current share price, 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 UZU? 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 UZU, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for UZU, 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 Uzin Utz at this point in time. Case in point: We've spotted 1 warning sign for Uzin Utz you should be aware of.

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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.
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