While STEICO SE (ETR:ST5) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the XTRA over the last few months, increasing to €56.30 at one point, and dropping to the lows of €43.20. 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 STEICO's current trading price of €45.15 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 STEICO’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for STEICO
What's The Opportunity In STEICO?
Good news, investors! STEICO is still a bargain right now. My valuation model shows that the intrinsic value for the stock is €58.47, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because STEICO’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 kind of growth will STEICO generate?
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. However, with a negative profit growth of -4.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for STEICO. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although ST5 is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to ST5, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on ST5 for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.