Is It Too Late To Consider Buying KPS AG (ETR:KSC)?

KPS AG (ETR:KSC), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €3.70 at one point, and dropping to the lows of €1.83. 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 KPS' current trading price of €1.83 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at KPS’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for KPS

Is KPS Still Cheap?

Great news for investors – KPS is still trading at a fairly cheap price according to my price multiple model, where I compare 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 KPS’s ratio of 9.65x is below its peer average of 18.08x, which indicates the stock is trading at a lower price compared to the IT industry. Although, there may be another chance to buy again in the future. This is because KPS’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.

What kind of growth will KPS generate?

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. KPS' earnings over the next few years are expected to increase by 37%, 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? Since KSC is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit 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 capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on KSC for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy KSC. 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 assessment.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that KPS has 3 warning signs and it would be unwise to ignore these.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.