What Does Bastei Lübbe AG's (ETR:BST) Share Price Indicate?

Bastei Lübbe AG (ETR:BST), is not the largest company out there, but it received a lot of attention from a substantial price increase on the XTRA over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Bastei Lübbe’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Bastei Lübbe

What Is Bastei Lübbe Worth?

Great news for investors – Bastei Lübbe is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 11.52x is currently well-below the industry average of 29.33x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Bastei Lübbe’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Bastei Lübbe generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a negative profit growth of -5.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Bastei Lübbe. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although BST is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to BST, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on BST for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Bastei Lübbe (1 is concerning!) and we strongly recommend you look at them before investing.

If you are no longer interested in Bastei Lübbe, 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. 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.