In This Article:
Let’s talk about the popular VERBUND AG (VIE:VER). The company’s shares saw a significant share price rise of over 20% in the past couple of months on the WBAG. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine VERBUND’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for VERBUND
Is VERBUND still cheap?
VERBUND appears to be overvalued according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 36.76x is currently well-above the industry average of 10.7x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that VERBUND’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will VERBUND generate?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. VERBUND’s earnings over the next few years are expected to increase by 71.0%, 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 well and truly priced in VER’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe VER should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on VER for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for VER, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.