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Why Grenke AG (ETR:GLJ) Could Be Worth Watching

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Grenke AG (ETR:GLJ), which is in the diversified financial business, and is based in Germany, saw a decent share price growth in the teens level on the XTRA over the last few months. With many analysts covering the mid-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? Let’s examine Grenke’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Grenke

Is Grenke still cheap?

The stock seems fairly valued at the moment according to my relative valuation model. 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 Grenke’s ratio of 33.07x is trading slightly above its industry peers’ ratio of 31.29x, which means if you buy Grenke today, you’d be paying a relatively fair price for it. And if you believe Grenke should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Grenke’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.

Can we expect growth from Grenke?

XTRA:GLJ Past and Future Earnings, July 8th 2019
XTRA:GLJ Past and Future Earnings, July 8th 2019

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. 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. Grenke’s earnings over the next few years are expected to increase by 61%, 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? GLJ’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 financial strength of the company. Have these factors changed since the last time you looked at GLJ? Will you have enough confidence to invest in the company should the price drop below its fair value?

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Are you a potential investor? If you’ve been keeping tabs on GLJ, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for GLJ, which 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 Grenke. You can find everything you need to know about Grenke in the latest infographic research report. If you are no longer interested in Grenke, 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.