Is it time to consider buying ElringKlinger AG (ETR:ZIL2)?

ElringKlinger AG (ETR:ZIL2) isn’t the biggest company out there, but its stock price has seen significant movements over the past few months on the XTRA, reaching a high of €7.20 and a low of €5.20. Certain stock price movements can give investors a better opportunity to enter the stock and potentially buy at a lower price. One has to ask whether ElringKlinger’s current price of €5.28 reflects the real value of the small cap? Or is it currently undervalued, giving us an opportunity to buy? Let’s take a look at ElringKlinger’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for ElringKlinger

Is ElringKlinger still cheap?

The stock price looks reasonable at the moment according to our price multiple model, in which we compare the company’s price-to-earnings ratio to the industry average. We used the price-to-earnings ratio in this case because there is not enough visibility to forecast its cash flows. The stock’s ratio of 7.27x is currently trading slightly below its industry peers’ ratio of 9.06x, which means if you buy ElringKlinger today, you’ll be paying a decent price for it. And if you think ElringKlinger should trade in this range, then there isn’t much room for the stock price to rise beyond the levels of other industry peers over the long term. So, is there another chance to buy low in the future? Since ElringKlinger stock is quite volatile (meaning its price movements are magnified relative to the rest of the market), this could mean that the price can fall, giving us the opportunity to ‘buy later. This is based on its high beta, which is a good indicator of stock price volatility.

Can we expect growth from ElringKlinger?

Investors looking for growth in their portfolio may want to consider a company’s prospects before buying its shares. Buying a great company with a strong outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With earnings expected to grow by 37% over the next two years, the future looks bright for ElringKlinger. It looks like higher cash flow is on the cards for the stock, which should translate into a higher share valuation.

What this means for you

Are you a shareholder? It appears the market has already priced in ZIL2’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors that we haven’t considered today, such as the background of its management team. Have these factors changed since you last looked at ZIL2? Will you have enough confidence to invest in the company if the price falls below the industry PE ratio?

Are you a potential investor? If you’ve been monitoring ZIL2, now may not be the most optimal time to buy, given that it’s trading around industry price multiples. However, the optimistic forecast is encouraging for ZIL2, meaning it is worth digging deeper into other factors such as its balance sheet strength, in order to take advantage of the next price drop.

Keep in mind that when it comes to analyzing a stock, it is worth noting the risks involved. Concrete example: we spotted 1 warning sign for ElringKlinger you should be aware of this.

If you are no longer interested in ElringKlinger, you can use our free platform to consult our list of more than 50 other stocks with high growth potential.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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