Is Now The Time To Look At Buying Deutsche Post AG (ETR:DPW)?

Deutsche Post AG (ETR:DPW) saw significant share price movement during recent months on the XTRA, rising to highs of €46.53 and falling to the lows of €36.26. 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 Deutsche Post's current trading price of €37.76 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Deutsche Post’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 Deutsche Post

What is Deutsche Post worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 8.83x is currently trading slightly below its industry peers’ ratio of 12.38x, which means if you buy Deutsche Post today, you’d be paying a decent price for it. And if you believe that Deutsche Post should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Deutsche Post’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 does the future of Deutsche Post look like?

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. Though in the case of Deutsche Post, it is expected to deliver a negative earnings growth of -1.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? DPW seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on DPW, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on DPW for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on DPW should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Deutsche Post at this point in time. Case in point: We've spotted 1 warning sign for Deutsche Post you should be aware of.

If you are no longer interested in Deutsche Post, 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.