Should You Investigate Infineon Technologies AG (ETR:IFX) At €22.30?

Let's talk about the popular Infineon Technologies AG (ETR:IFX). The company's shares saw significant share price movement during recent months on the XTRA, rising to highs of €28.53 and falling to the lows of €21.07. 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 Infineon Technologies' current trading price of €22.30 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 Infineon Technologies’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 Infineon Technologies

What Is Infineon Technologies Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Infineon Technologies’s ratio of 15.32x is trading slightly above its industry peers’ ratio of 13.13x, which means if you buy Infineon Technologies today, you’d be paying a relatively reasonable price for it. And if you believe Infineon Technologies should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Infineon Technologies’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Infineon Technologies 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. With profit expected to grow by 48% over the next couple of years, the future seems bright for Infineon Technologies. 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? IFX’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at IFX? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on IFX, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for IFX, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for Infineon Technologies from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

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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.