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Deutsche Lufthansa AG (ETR:LHA), might not be a large cap stock, but it saw a decent share price growth of 12% on the XTRA over the last few months. While good news for shareholders, the company has traded much higher in the past year. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Deutsche Lufthansa’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Deutsche Lufthansa
What Is Deutsche Lufthansa Worth?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 6.75x is currently trading slightly above its industry peers’ ratio of 6.75x, which means if you buy Deutsche Lufthansa today, you’d be paying a relatively reasonable price for it. And if you believe Deutsche Lufthansa should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Deutsche Lufthansa’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Deutsche Lufthansa 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. 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. With profit expected to grow by 49% over the next couple of years, the future seems bright for Deutsche Lufthansa. 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 LHA’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 financial strength of the company. Have these factors changed since the last time you looked at LHA? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?