Should You Investigate Fnac Darty SA (EPA:FNAC) At €52.15?

While Fnac Darty SA (EPA:FNAC) 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 €60.15 at one point, and dropping to the lows of €52.15. 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 Fnac Darty's current trading price of €52.15 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fnac Darty’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 Fnac Darty

What is Fnac Darty worth?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Fnac Darty’s ratio of 14.45x is trading slightly above its industry peers’ ratio of 14.17x, which means if you buy Fnac Darty today, you’d be paying a relatively sensible price for it. And if you believe that Fnac Darty should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Fnac Darty’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 Fnac Darty 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. Fnac Darty's earnings over the next few years are expected to increase by 70%, 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? FNAC’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 FNAC? 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 FNAC, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for FNAC, 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 want to dive deeper into Fnac Darty, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Fnac Darty you should know about.

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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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