Is It Too Late To Consider Buying SEB SA (EPA:SK)?

While SEB SA (EPA:SK) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the ENXTPA over the last few months, increasing to €151 at one point, and dropping to the lows of €136. 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 SEB's current trading price of €146 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 SEB’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for SEB

Is SEB still cheap?

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 26.91x is currently trading slightly above its industry peers’ ratio of 26.7x, which means if you buy SEB today, you’d be paying a relatively sensible price for it. And if you believe that SEB should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, SEB’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will SEB generate?

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. SEB's earnings over the next few years are expected to increase by 54%, 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? SK’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 SK? 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 SK, 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 SK, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with SEB, and understanding them should be part of your investment process.

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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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