Is Now An Opportune Moment To Examine Koninklijke Philips N.V. (AMS:PHIA)?

Koninklijke Philips N.V. (AMS:PHIA) saw significant share price movement during recent months on the ENXTAM, rising to highs of €24.33 and falling to the lows of €17.55. 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 Koninklijke Philips' current trading price of €17.55 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Koninklijke Philips’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 Koninklijke Philips

Is Koninklijke Philips Still Cheap?

Koninklijke Philips is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 38.4x is currently well-above the industry average of 26.66x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Koninklijke Philips’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Koninklijke Philips look like?

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. Koninklijke Philips' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in PHIA’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe PHIA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PHIA for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for PHIA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Koninklijke Philips, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Koninklijke Philips you should be aware of.

If you are no longer interested in Koninklijke Philips, 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.