Is Now An Opportune Moment To Examine Salvatore Ferragamo S.p.A. (BIT:SFER)?

Salvatore Ferragamo S.p.A. (BIT:SFER), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the BIT. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Salvatore Ferragamo’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Salvatore Ferragamo

What Is Salvatore Ferragamo Worth?

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 27.87x is currently trading slightly above its industry peers’ ratio of 23.39x, which means if you buy Salvatore Ferragamo today, you’d be paying a relatively reasonable price for it. And if you believe that Salvatore Ferragamo should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Salvatore Ferragamo’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

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 -2.0% 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 advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Salvatore Ferragamo.

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.