Should You Buy LEG Immobilien AG (ETR:LEG)?
LEG Immobilien AG (XTRA:LEG), a real estate company based in Germany, saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. As a mid-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 LEG Immobilien’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for LEG Immobilien
What is LEG Immobilien worth?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that LEG Immobilien’s ratio of 7.04x is trading slightly below its industry peers’ ratio of 8.58x, which means if you buy LEG Immobilien today, you’d be paying a reasonable price for it. And if you believe that LEG Immobilien should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, LEG Immobilien’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of LEG Immobilien look like?
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. Though in the case of LEG Immobilien, it is expected to deliver a highly negative earnings growth in the next few years, 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, LEG 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 LEG, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on LEG 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. Furthermore, 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 LEG 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 LEG Immobilien. You can find everything you need to know about LEG Immobilien in the latest infographic research report. If you are no longer interested in LEG Immobilien, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
