Is Sabaf S.p.A. (BIT:SAB) Potentially Undervalued?

By
Simply Wall St
Published
February 17, 2022
BIT:SAB
Source: Shutterstock

Sabaf S.p.A. (BIT:SAB), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the BIT over the last few months, increasing to €27.70 at one point, and dropping to the lows of €22.30. 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 Sabaf's current trading price of €22.30 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 Sabaf’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Sabaf

Is Sabaf still cheap?

According to my valuation model, Sabaf seems to be fairly priced at around 4.7% below my intrinsic value, which means if you buy Sabaf today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €23.39, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Sabaf’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Sabaf?

earnings-and-revenue-growth
BIT:SAB Earnings and Revenue Growth February 17th 2022

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. Sabaf's earnings over the next few years are expected to increase by 28%, 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? SAB’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on SAB, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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 Sabaf as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Sabaf has 2 warning signs and it would be unwise to ignore them.

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

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