Is Aareal Bank AG (ETR:ARL) Potentially Undervalued?
Aareal Bank AG (ETR:ARL), operating in the financial services industry based in Germany, received a lot of attention from a substantial price increase on the XTRA over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Aareal Bank’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Aareal Bank
What's the opportunity in Aareal Bank?
According to my valuation model, the stock is currently overvalued by about 27%, trading at €27.50 compared to my intrinsic value of €21.61. This means that the opportunity to buy Aareal Bank at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Aareal Bank’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
What kind of growth will Aareal Bank 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. However, with a negative profit growth of -16% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Aareal Bank. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe ARL 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. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. 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 tabs on ARL for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Aareal Bank. You can find everything you need to know about Aareal Bank in the latest infographic research report. If you are no longer interested in Aareal Bank, 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.
