Let’s talk about the popular Crédit Agricole SA (EPA:ACA). The company’s shares received a lot of attention from a substantial price movement on the ENXTPA over the last few months, increasing to €12.99 at one point, and dropping to the lows of €11.13. 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 Crédit Agricole’s current trading price of €11.51 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 Crédit Agricole’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 Crédit Agricole?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Crédit Agricole’s ratio of 9.83x is trading in-line with its industry peers’ ratio, which means if you buy Crédit Agricole today, you’d be paying a relatively reasonable price for it. So, is there another chance to buy low in the future? Given that Crédit Agricole’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 Crédit Agricole 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. With profit expected to grow by 47% over the next couple of years, the future seems bright for Crédit Agricole. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ACA’s positive outlook, with shares trading around its fair value. 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 ACA? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on ACA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for ACA, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 Crédit Agricole. You can find everything you need to know about Crédit Agricole in the latest infographic research report. If you are no longer interested in Crédit Agricole, 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 firstname.lastname@example.org.