Today we’re going to take a look at the well-established Fiat Chrysler Automobiles NV (BIT:FCA). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the BIT. 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, what if the stock is still a bargain? Let’s take a look at Fiat Chrysler Automobiles’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Fiat Chrysler Automobiles
Is Fiat Chrysler Automobiles 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 Fiat Chrysler Automobiles’s ratio of 7.4x is trading slightly below its industry peers’ ratio of 8.67x, which means if you buy Fiat Chrysler Automobiles today, you’d be paying a reasonable price for it. And if you believe that Fiat Chrysler Automobiles should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Fiat Chrysler Automobiles’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.
What does the future of Fiat Chrysler Automobiles 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. Fiat Chrysler Automobiles’s earnings over the next few years are expected to increase by 95%, 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 already priced in FCA’s positive outlook, with shares trading around its fair value. 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 FCA? Will you have enough conviction to buy should the price fluctuate below the true value?