At €10.82, Is Adler Group S.A. (ETR:ADJ) Worth Looking At Closely?

By
Simply Wall St
Published
December 24, 2021
XTRA:ADJ
Source: Shutterstock

Adler Group S.A. (ETR:ADJ), is not the largest company out there, but it led the XTRA gainers with a relatively large price hike in the past couple of weeks. 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? Today I will analyse the most recent data on Adler Group’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Adler Group

What's the opportunity in Adler Group?

Good news, investors! Adler Group 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 Adler Group’s ratio of 2.57x is below its peer average of 14.37x, which indicates the stock is trading at a lower price compared to the Real Estate industry. However, given that Adler Group’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 kind of growth will Adler Group generate?

earnings-and-revenue-growth
XTRA:ADJ Earnings and Revenue Growth December 24th 2021

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. 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. Though in the case of Adler Group, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although ADJ is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to ADJ, 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 ADJ for some time, but hesitant on making the leap, I 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Adler Group has 6 warning signs (2 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Adler Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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