Lectra (ENXTPA:LSS) Valuation: Is the Discount an Opportunity or a Warning for Investors?

Lectra (ENXTPA:LSS) shares have moved slightly over the past week, edging up just under 3%. With the stock showing modest gains and a mixed performance over the past month, investors are looking closely at its underlying trends.

See our latest analysis for Lectra.

Lectra’s share price may have gained traction this week, but zooming out shows a more nuanced picture. While the share price has faced pressure this year with an 8.97% decline year-to-date, long-term shareholders have still enjoyed a 3.77% total return over the past year, even after some bumps along the way. Momentum feels a bit lukewarm for now, but the business fundamentals remain on investors’ radar.

If you’re ready to branch out beyond Lectra, now could be a smart time to discover fast growing stocks with high insider ownership.

With Lectra trading nearly 27% below analyst price targets and a sizable intrinsic discount, the key question is whether this signals an overlooked value or if the market already reflects its future prospects.

Price-to-Earnings of 29.4x: Is it justified?

Lectra’s shares are trading at a price-to-earnings (P/E) ratio of 29.4x, which stands out compared to both industry peers and historical levels. With a last close price of €23.85, the company is commanding a notable premium over the peer average.

The P/E ratio is a widely used value metric that compares a company’s share price to its earnings per share. For software companies like Lectra, a higher multiple can indicate strong growth expectations or reflect market optimism about future profitability. However, it may also signal that the market is overestimating future earnings potential.

Lectra’s P/E is not only higher than the European Software industry average of 28x but also exceeds the peer average of 25.6x and the estimated fair P/E ratio of 24.1x. This premium suggests investors are pricing in robust earnings growth, yet it also means the market could reevaluate if growth does not materialize as anticipated.

Explore the SWS fair ratio for Lectra

Result: Price-to-Earnings of 29.4x (OVERVALUED)

However, sluggish three-year returns and the possible overestimation of future earnings growth could challenge the current premium on Lectra’s shares.

Find out about the key risks to this Lectra narrative.

Another View: Discounted Cash Flow Tells a Different Story

Looking beyond earnings multiples, our DCF model offers a striking alternative. By estimating Lectra's future cash flows, the SWS DCF model suggests the shares could be trading about 44% below their fair value. Does this point to a hidden bargain, or is the market seeing risks our model cannot?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Lectra for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 853 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Lectra Narrative

If you see the numbers differently or want to dig deeper on your own, you can craft a personalized view in just a few minutes with Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Lectra.

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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.

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