Why Zalando SE (ETR:ZAL) Could Be Worth Watching

Let's talk about the popular Zalando SE (ETR:ZAL). The company's shares received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €105 at one point, and dropping to the lows of €77.24. 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 Zalando's current trading price of €77.24 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Zalando’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Zalando

What's the opportunity in Zalando?

Great news for investors – Zalando is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is €113.83, but it is currently trading at €77.24 on the share market, meaning that there is still an opportunity to buy now. However, given that Zalando’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.

Can we expect growth from Zalando?

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 profit expected to grow by 42% over the next couple of years, the future seems bright for Zalando. 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? Since ZAL is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on ZAL for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ZAL. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you want to dive deeper into Zalando, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Zalando you should know about.

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

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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