When Should You Buy Trelleborg AB (publ) (STO:TREL B)?

Trelleborg AB (publ) (STO:TREL B), might not be a large cap stock, but it saw significant share price movement during recent months on the OM, rising to highs of kr295 and falling to the lows of kr247. 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 Trelleborg's current trading price of kr259 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 Trelleborg’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Trelleborg

What Is Trelleborg Worth?

According to my valuation model, Trelleborg seems to be fairly priced at around 13.68% above my intrinsic value, which means if you buy Trelleborg today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is SEK227.48, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Trelleborg’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Trelleborg 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. With profit expected to grow by a double-digit 19% over the next couple of years, the outlook is positive for Trelleborg. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? TREL B’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on TREL B, 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Trelleborg at this point in time. For example, Trelleborg has 3 warning signs (and 2 which are significant) we think you should know about.

If you are no longer interested in Trelleborg, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.