Is LEG Immobilien SE (ETR:LEG) Potentially Undervalued?

LEG Immobilien SE (ETR:LEG), is not the largest company out there, but it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €96.10 at one point, and dropping to the lows of €83.00. 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 LEG Immobilien's current trading price of €83.80 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at LEG Immobilien’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for LEG Immobilien

What Is LEG Immobilien Worth?

According to our valuation model, the stock is currently overvalued by about 40%, trading at €83.80 compared to our intrinsic value of €59.89. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that LEG Immobilien’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, 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 LEG Immobilien 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 an extreme expected decline in the top-line over the next couple of years, near-term growth is certainly not a driver of a buy decision. Even with a larger decline in expenses, it seems like high uncertainty is on the cards for LEG Immobilien.

What This Means For You

Are you a shareholder? If you believe LEG 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 uncertainty from negative growth in the future, 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 tabs on LEG for some time, now may not be the best time to enter into the stock. The company’s 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 track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, LEG Immobilien has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you are no longer interested in LEG Immobilien, 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.