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What Does SMA Solar Technology AG's (ETR:S92) Share Price Indicate?

Simply Wall St
·3 mins read

SMA Solar Technology AG (ETR:S92), which is in the semiconductor business, and is based in Germany, saw a significant share price rise of over 20% in the past couple of months on the XTRA. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on SMA Solar Technology’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for SMA Solar Technology

Is SMA Solar Technology still cheap?

SMA Solar Technology appears to be overvalued by 43% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €34.46 on the market compared to my intrinsic value of €24.03. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that SMA Solar Technology’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of SMA Solar Technology look like?

XTRA:S92 Past and Future Earnings, February 11th 2020
XTRA:S92 Past and Future Earnings, February 11th 2020

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. SMA Solar Technology’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in S92’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe S92 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. 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 an eye on S92 for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for S92, which means it’s worth diving deeper into other factors 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 SMA Solar Technology. You can find everything you need to know about SMA Solar Technology in the latest infographic research report. If you are no longer interested in SMA Solar Technology, 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.