Today we're going to take a look at the well-established Infineon Technologies AG (ETR:IFX). The company's stock led the XTRA gainers with a relatively large price hike in the past couple of weeks. As a large-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? Today I will analyse the most recent data on Infineon Technologies’s outlook and valuation to see if the opportunity still exists.
What is Infineon Technologies worth?
According to my valuation model, the stock is currently overvalued by about 42%, trading at €20.31 compared to my intrinsic value of €14.33. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Infineon Technologies’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Infineon Technologies look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Infineon Technologies’s earnings over the next few years are expected to increase by 45%, 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? It seems like the market has well and truly priced in IFX’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe IFX should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 IFX for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for IFX, which means it’s worth diving deeper into other factors 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 Infineon Technologies. You can find everything you need to know about Infineon Technologies in the latest infographic research report. If you are no longer interested in Infineon Technologies, 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 email@example.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.
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