Legrand SA (EPA:LR) saw significant share price volatility over the past couple of months on the ENXTPA, rising to the highs of €65.08 and falling to the lows of €57.26. 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 Legrand’s current trading price of €58.84 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Legrand’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in Legrand?
According to my valuation model, the stock is currently overvalued by about 38.87%, trading at €58.84 compared to my intrinsic value of €42.37. Not the best news for investors looking to buy! In addition to this, it seems like Legrand’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Legrand generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 relatively muted profit growth of 8.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Legrand, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in LR’s future 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 LR 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 tabs on LR for some time, 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 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 Legrand. You can find everything you need to know about Legrand in the latest infographic research report. If you are no longer interested in Legrand, 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 email@example.com.