Nedap N.V. (AMS:NEDAP), might not be a large cap stock, but it saw significant share price movement during recent months on the ENXTAM, rising to highs of €63.10 and falling to the lows of €53.60. 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 Nedap's current trading price of €57.50 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 Nedap’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Nedap worth?
According to my valuation model, Nedap seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Nedap today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €64.68, then there’s not much of an upside to gain from mispricing. Furthermore, Nedap’s low beta implies that the stock is less volatile than the wider market.
What does the future of Nedap look like?
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. 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. Nedap's earnings over the next few years are expected to increase by 31%, 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? It seems like the market has already priced in NEDAP’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on NEDAP, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 2 warning signs for Nedap (1 is significant!) and we strongly recommend you look at these before investing.
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This article by Simply Wall St is general in nature. 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.
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