While ProSiebenSat.1 Media SE (ETR:PSM) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level 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. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on ProSiebenSat.1 Media’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in ProSiebenSat.1 Media?
Good news, investors! ProSiebenSat.1 Media is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 ProSiebenSat.1 Media’s ratio of 5.87x is below its peer average of 20.34x, which indicates the stock is trading at a lower price compared to the Media industry. Although, there may be another chance to buy again in the future. This is because ProSiebenSat.1 Media’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.
What does the future of ProSiebenSat.1 Media look like?
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. However, with a negative profit growth of -18% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for ProSiebenSat.1 Media. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although PSM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to PSM, 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 an eye on PSM for a while, but hesitant on making the leap, I recommend you research further 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.
If you want to dive deeper into ProSiebenSat.1 Media, you'd also look into what risks it is currently facing. For example, ProSiebenSat.1 Media has 5 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you are no longer interested in ProSiebenSat.1 Media, 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.