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eDreams ODIGEO SA (BME:EDR), which is in the online retail business, and is based in Luxembourg, received a lot of attention from a substantial price increase on the BME over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine eDreams ODIGEO’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for eDreams ODIGEO
What’s the opportunity in eDreams ODIGEO?
According to my valuation model, eDreams ODIGEO seems to be fairly priced at around 14.8% below my intrinsic value, which means if you buy eDreams ODIGEO today, you’d be paying a fair price for it. And if you believe the company’s true value is €4.43, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that eDreams ODIGEO’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of eDreams ODIGEO 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. eDreams ODIGEO’s earnings over the next few years are expected to increase by 61.2%, 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? EDR’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 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 EDR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.