What Is Indra Sistemas, S.A.'s (BME:IDR) Share Price Doing?

Indra Sistemas, S.A. (BME:IDR), 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. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Indra Sistemas’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Indra Sistemas

What's the opportunity in Indra Sistemas?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 24.98x is currently trading slightly below its industry peers’ ratio of 26.39x, which means if you buy Indra Sistemas today, you’d be paying a decent price for it. And if you believe Indra Sistemas should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Indra Sistemas’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 Indra Sistemas generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Indra Sistemas' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? IDR’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at IDR? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on IDR, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for IDR, which means it’s worth diving deeper into 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 Indra Sistemas as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for Indra Sistemas (1 shouldn't be ignored!) that we believe deserve your full attention.

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

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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