Is It Too Late To Consider Buying Signify N.V. (AMS:LIGHT)?

While Signify N.V. (AMS:LIGHT) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ENXTAM, rising to highs of €35.84 and falling to the lows of €28.20. 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 Signify's current trading price of €28.47 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 Signify’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 Signify

What Is Signify Worth?

Good news, investors! Signify is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Signify’s ratio of 6.05x is below its peer average of 20.72x, which indicates the stock is trading at a lower price compared to the Electrical industry. However, given that Signify’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Signify generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a negative profit growth of -8.5% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Signify. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although LIGHT is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to LIGHT, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on LIGHT for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 4 warning signs (2 make us uncomfortable!) that you ought to be aware of before buying any shares in Signify.

If you are no longer interested in Signify, 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.