Today we're going to take a look at the well-established Fresenius Medical Care AG & Co. KGaA (ETR:FME). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Fresenius Medical Care KGaA’s outlook and valuation to see if the opportunity still exists.
Is Fresenius Medical Care KGaA Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Fresenius Medical Care KGaA’s ratio of 19.6x is trading in-line with its industry peers’ ratio, which means if you buy Fresenius Medical Care KGaA today, you’d be paying a relatively sensible price for it. Furthermore, it seems like Fresenius Medical Care KGaA’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Fresenius Medical Care KGaA look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 82% over the next couple of years, the future seems bright for Fresenius Medical Care KGaA. 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 FME’s positive outlook, with shares trading around industry price multiples. 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 FME? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on FME, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for FME, 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.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for Fresenius Medical Care KGaA you should be aware of.
If you are no longer interested in Fresenius Medical Care KGaA, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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