At €75.54, Is It Time To Put Fraport AG (ETR:FRA) On Your Watch List?
Fraport AG (ETR:FRA), which is in the infrastructure business, and is based in Germany, maintained its current share price over the past couple of month on the XTRA, with a relatively tight range of €72.56 to €78.00. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fraport’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 Fraport
Is Fraport still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.06x is currently trading slightly below its industry peers’ ratio of 16.78x, which means if you buy Fraport today, you’d be paying a reasonable price for it. And if you believe that Fraport should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Fraport’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Fraport 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. 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. Though in the case of Fraport, it is expected to deliver a negative earnings growth of -2.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, FRA appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on FRA, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on FRA for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on FRA should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Fraport. You can find everything you need to know about Fraport in the latest infographic research report. If you are no longer interested in Fraport, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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. Thank you for reading.
