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Should You Think About Buying SMA Solar Technology AG (ETR:S92) Now?

Simply Wall St

SMA Solar Technology AG (ETR:S92), which is in the semiconductor business, and is based in Germany, received a lot of attention from a substantial price increase on the XTRA over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at SMA Solar Technology’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for SMA Solar Technology

Is SMA Solar Technology still cheap?

According to my valuation model, the stock is currently overvalued by about 41.03%, trading at €22.90 compared to my intrinsic value of €16.24. This means that the opportunity to buy SMA Solar Technology at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since SMA Solar Technology’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 kind of growth will SMA Solar Technology generate?

XTRA:S92 Past and Future Earnings, March 12th 2019
XTRA:S92 Past and Future Earnings, March 12th 2019

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. However, with a negative profit growth of -14% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for SMA Solar Technology. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? If you believe S92 is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. 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 an eye on S92 for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on SMA Solar Technology. You can find everything you need to know about SMA Solar Technology in the latest infographic research report. If you are no longer interested in SMA Solar Technology, 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 editorial-team@simplywallst.com. 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.