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At €21.24, Is Peugeot S.A. (EPA:UG) Worth Looking At Closely?

Simply Wall St

Let's talk about the popular Peugeot S.A. (EPA:UG). The company's shares saw significant share price movement during recent months on the ENXTPA, rising to highs of €26.05 and falling to the lows of €19.62. 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 Peugeot's current trading price of €21.24 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 Peugeot’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 Peugeot

Is Peugeot still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Peugeot’s ratio of 5.97x is trading slightly below its industry peers’ ratio of 9.98x, which means if you buy Peugeot today, you’d be paying a fair price for it. And if you believe Peugeot should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Is there another opportunity to buy low in the future? Since Peugeot’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.

Can we expect growth from Peugeot?

ENXTPA:UG Past and Future Earnings, December 6th 2019

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. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Peugeot. 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? UG’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 UG? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping tabs on UG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for UG, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Peugeot. You can find everything you need to know about Peugeot in the latest infographic research report. If you are no longer interested in Peugeot, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.