When Should You Buy Sandvik AB (publ) (STO:SAND)?

Sandvik AB (publ) (STO:SAND) received a lot of attention from a substantial price movement on the OM over the last few months, increasing to kr261 at one point, and dropping to the lows of kr187. 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 Sandvik's current trading price of kr198 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 Sandvik’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 Sandvik

What is Sandvik 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 17.17x is currently trading slightly below its industry peers’ ratio of 20.29x, which means if you buy Sandvik today, you’d be paying a decent price for it. And if you believe that Sandvik 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. Is there another opportunity to buy low in the future? Since Sandvik’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Sandvik 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. Sandvik's earnings over the next few years are expected to increase by 36%, 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? SAND’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SAND? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SAND, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SAND, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Sandvik, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Sandvik and you'll want to know about these.

If you are no longer interested in Sandvik, 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.