When Should You Buy SMA Solar Technology AG (ETR:S92)?

SMA Solar Technology AG (ETR:S92), is not the largest company out there, but it saw significant share price movement during recent months on the XTRA, rising to highs of €112 and falling to the lows of €71.35. 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 SMA Solar Technology's current trading price of €71.35 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 SMA Solar Technology’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 SMA Solar Technology

What Is SMA Solar Technology 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 SMA Solar Technology’s ratio of 14.57x is trading in-line with its industry peers’ ratio, which means if you buy SMA Solar Technology today, you’d be paying a relatively sensible price for it. So, is there another chance to buy low in the future? Given that SMA Solar Technology’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.

Can we expect growth from SMA Solar Technology?

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. SMA Solar Technology's earnings over the next few years are expected to increase by 30%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? S92’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 financial strength of the company. Have these factors changed since the last time you looked at S92? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on S92, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for S92, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into SMA Solar Technology, you'd also look into what risks it is currently facing. For example, we've found that SMA Solar Technology has 2 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.

If you are no longer interested in SMA Solar Technology, 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.