Is It Too Late To Consider Buying Fabasoft AG (ETR:FAA)?

While Fabasoft AG (ETR:FAA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the XTRA over the last few months. 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 Fabasoft’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Fabasoft

Is Fabasoft Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.19% above my intrinsic value, which means if you buy Fabasoft today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is €18.54, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Fabasoft’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Fabasoft?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 75% over the next couple of years, the future seems bright for Fabasoft. 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? FAA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on FAA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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 Fabasoft, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Fabasoft you should be aware of.

If you are no longer interested in Fabasoft, 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.