In This Article:
While LS telcom AG (ETR:LSX) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the XTRA over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on LS telcom’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for LS telcom
What Is LS telcom Worth?
According to our valuation model, LS telcom seems to be fairly priced at around 14% below our intrinsic value, which means if you buy LS telcom today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €4.88, then there’s not much of an upside to gain from mispricing. What's more, LS telcom’s share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from LS telcom?
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. Though in the case of LS telcom, it is expected to deliver a negative revenue growth of -7.3% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Currently, LSX appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on LSX for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on LSX should the price fluctuate below its true value.