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Deutsche EuroShop AG (XTRA:DEQ), a real estate company based in Germany, saw significant share price volatility over the past couple of months on the XTRA, rising to the highs of €32.64 and falling to the lows of €28.8. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Deutsche EuroShop’s current trading price of €28.88 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Deutsche EuroShop’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Deutsche EuroShop
Is Deutsche EuroShop still cheap?
Deutsche EuroShop appears to be overvalued by 27% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €28.88 on the market compared to my intrinsic value of €22.66. Not the best news for investors looking to buy! In addition to this, it seems like Deutsche EuroShop’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Deutsche EuroShop generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a negative profit growth of -5.63% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Deutsche EuroShop. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe DEQ is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on DEQ for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?