Is It Too Late To Consider Buying Salvatore Ferragamo S.p.A. (BIT:SFER)?

Salvatore Ferragamo S.p.A. (BIT:SFER), is not the largest company out there, but it saw significant share price movement during recent months on the BIT, rising to highs of €17.87 and falling to the lows of €13.62. 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 Salvatore Ferragamo's current trading price of €14.73 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 Salvatore Ferragamo’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out the opportunities and risks within the IT Luxury industry.

What Is Salvatore Ferragamo 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. 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 21.99x is currently trading slightly below its industry peers’ ratio of 22.21x, which means if you buy Salvatore Ferragamo today, you’d be paying a decent price for it. And if you believe that Salvatore Ferragamo should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Salvatore Ferragamo’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 Salvatore Ferragamo 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. However, with a negative profit growth of -6.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Salvatore Ferragamo. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, SFER appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on SFER, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SFER for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on SFER should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Salvatore Ferragamo, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Salvatore Ferragamo has 1 warning sign and it would be unwise to ignore it.

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

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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.