Is There Now An Opportunity In 1&1 AG (ETR:1U1)?

1&1 AG (ETR:1U1), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine 1&1’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for 1&1

What is 1&1 worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.13% above my intrinsic value, which means if you buy 1&1 today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is €25.42, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, 1&1’s low beta implies that the stock is less volatile than the wider market.

What does the future of 1&1 look like?

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. 1&1's earnings over the next few years are expected to increase by 29%, 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? 1U1’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 financial strength of the company. 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 1U1, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

If you'd like to know more about 1&1 as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for 1&1 and you'll want to know about them.

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This article by Simply Wall St is general in nature. 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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