Salvatore Ferragamo S.p.A. (BIT:SFER), which is in the luxury business, and is based in Italy, led the BIT gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Salvatore Ferragamo’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Salvatore Ferragamo?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6.7% below my intrinsic value, which means if you buy Salvatore Ferragamo today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth €13.12, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Salvatore Ferragamo’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.
Can we expect growth from Salvatore Ferragamo?
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 relatively muted profit growth of 8.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Salvatore Ferragamo, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in SFER’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on SFER, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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 Salvatore Ferragamo. You can find everything you need to know about Salvatore Ferragamo in the latest infographic research report. If you are no longer interested in Salvatore Ferragamo, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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