Should You Investigate Gerresheimer AG (FRA:GXI) At €63.85?
Gerresheimer AG (FRA:GXI), which is in the life sciences business, and is based in Germany, saw significant share price volatility over the past couple of months on the DB, rising to the highs of €79.75 and falling to the lows of €59.5. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Gerresheimer’s current trading price of €63.85 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 Gerresheimer’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Gerresheimer
What’s the opportunity in Gerresheimer?
According to my valuation model, Gerresheimer seems to be fairly priced at around 0.9% below my intrinsic value, which means if you buy Gerresheimer today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €64.41, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Gerresheimer’s share price is quite stable, which could mean 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 Gerresheimer 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. Though in the case of Gerresheimer, it is expected to deliver a negative earnings growth of -5.8%, 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? GXI seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on GXI for a while, now may not be the most advantageous 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 GXI 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 Gerresheimer. You can find everything you need to know about Gerresheimer in the latest infographic research report. If you are no longer interested in Gerresheimer, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
