At CHF34.56, Is It Time To Put Adecco Group AG (VTX:ADEN) On Your Watch List?
While Adecco Group AG (VTX:ADEN) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the SWX over the last few months, increasing to CHF42.23 at one point, and dropping to the lows of CHF34.26. 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 Adecco Group's current trading price of CHF34.56 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Adecco Group’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 Adecco Group
Is Adecco Group Still Cheap?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Adecco Group’s ratio of 18.46x is trading slightly above its industry peers’ ratio of 18.37x, which means if you buy Adecco Group today, you’d be paying a relatively sensible price for it. And if you believe that Adecco Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Adecco Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Adecco Group 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. Adecco Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? ADEN’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ADEN? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on ADEN, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ADEN, 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Adecco Group is showing 3 warning signs in our investment analysis and 2 of those are a bit concerning...
If you are no longer interested in Adecco Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
