Is CIE Automotive, S.A. (BME:CIE) Potentially Undervalued?

CIE Automotive, S.A. (BME:CIE), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the BME. 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, what if the stock is still a bargain? Let’s take a look at CIE Automotive’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for CIE Automotive

Is CIE Automotive still cheap?

The stock is currently trading at €23.36 on the share market, which means it is overvalued by 29% compared to my intrinsic value of €18.13. This means that the opportunity to buy CIE Automotive at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that CIE Automotive’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from CIE Automotive?

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. 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. CIE Automotive's earnings over the next few years are expected to increase by 65%, 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? It seems like the market has well and truly priced in CIE’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 CIE 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 tabs on CIE for some time, 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 optimistic prospect is encouraging for CIE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing CIE Automotive at this point in time. When we did our research, we found 3 warning signs for CIE Automotive (1 is significant!) that we believe deserve your full attention.

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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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