Koenig & Bauer AG (ETR:SKB), which is in the machinery business, and is based in Germany, received a lot of attention from a substantial price increase on the XTRA over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Koenig & Bauer’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Koenig & Bauer worth?
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 Koenig & Bauer’s ratio of 10.93x is trading slightly below its industry peers’ ratio of 14.33x, which means if you buy Koenig & Bauer today, you’d be paying a reasonable price for it. And if you believe Koenig & Bauer should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Koenig & Bauer’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Koenig & Bauer generate?
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. Koenig & Bauer’s earnings over the next few years are expected to increase by 46%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? SKB’s optimistic future growth appears to have been factored into the current share price, 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 SKB? 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 SKB, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SKB, which means it’s worth further examining 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 Koenig & Bauer. You can find everything you need to know about Koenig & Bauer in the latest infographic research report. If you are no longer interested in Koenig & Bauer, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.