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Is There Now An Opportunity In BASF SE (FRA:BAS)?

Kelly Murphy

BASF SE (FRA:BAS) received a lot of attention from a substantial price movement on the DB over the last few months, increasing to €70 at one point, and dropping to the lows of €58.9. 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 BASF’s current trading price of €63.63 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 BASF’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 BASF

What is BASF worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.47% above my intrinsic value, which means if you buy BASF today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is €55.59, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since BASF’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of BASF look like?

DB:BAS Future Profit January 25th 19

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 BASF, it is expected to deliver a negative earnings growth of -10%, 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? BAS seems fairly priced right now, 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 the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on BAS 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 BAS 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 BASF. You can find everything you need to know about BASF in the latest infographic research report. If you are no longer interested in BASF, 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.