While 1&1 AG (ETR:1U1) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the XTRA, rising to highs of €27.64 and falling to the lows of €24.38. 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 1&1's current trading price of €26.64 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 1&1’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for 1&1
What's the opportunity in 1&1?
1&1 appears to be overvalued by 23% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €26.64 on the market compared to my intrinsic value of €21.66. Not the best news for investors looking to buy! Another thing to keep in mind is that 1&1’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from 1&1?
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 45% over the next couple of years, the future seems bright for 1&1. 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? It seems like the market has well and truly priced in 1U1’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 1U1 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on 1U1 for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for 1U1, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into 1&1, you'd also look into what risks it is currently facing. For example - 1&1 has 2 warning signs we think you should be aware of.
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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.
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About XTRA:1U1
Flawless balance sheet and undervalued.
